Vitali Mossounov

[music] Hello I'm Greg Bonnell and welcome to MoneyTalk Live brought to you by TD Direct Investing. every day I'll be joined from guests from across TD many of whom you'll only see here. We'll take you through what's moving the markets and answer your questions about investing. Coming up on today show: it's been a bit of a roller coaster year for tech stocks. But how much is based on general market sentiment versus company fundamentals? Vitali Mossounov, Global Technology Analyst and Portfolio Manager at TD Asset Management is here to talk all things tech. And in today's WebBroker education segment, Hiren Amin, Senior Client Education Instructor at TD Direct Investing, is going to show us how to trade outside of the regular trading session. So here's how you can get in touch with us: just email MoneyTalk Live, MoneyTalkLive@td.com. Or fillet of your response box under the video player WebBroker. Before we get to our guest of the day, let's get you an update on the markets. It's not a good sight, successful days of downside action continuing today. 19,000… The TSX comps it down. 317 points, more than 1 1/2%. The pain is pretty broad-based. And the big three: energy, financials and cereal stocks are under pressure as well. Last time I saw, maybe a few stocks and what you would consider a consumer Staples space, safer play. More positive territory. We'll start with some big energy names. Cenovus Energy, we've seen sizable pullbacks in the price of American benchmark crude. Cenovus at 24, 12. A little more than 2% renewal. Although there are some were defensive names out there considering consumer Staples. Let's check on the Empire Company. Of course this is the parent company of Sobey's. Positive territory and almost up 1.8 of a percent. S&P 500, that brought her read in the American market down to the tune of a little more percent. the tech heavy NASDAQ, down more than 2%. Freeport McMoran, the mining energy spaces, seeing some pressure on the downside there. That's down more than 6% in today's session alone. An aftermarket update. We've been seeing a broader market selloff after the rally had through the Summer. That's included the tech sector. But how are these companies actually faring in terms of fundamentals? Who better to answer that question then Vitali Mossounov, Global Tech Analyst at TD Asset Management. Vitali, great to have you back of the show. >> Great to be here thanks. >>… Investors are wondering if it will be more of the same choppiness are things will get better? >> Do we ever read two thirds of the way through this quarter of the actual fundamental health of some of these companies? Can we start to make any sort of, not pronouncements, maybe observations? >> I think they are doing good but not great. We have definitely seen weakness. Some headwinds are merging, longer deal cycles with some of these companies. Having trouble selling their products a lot of the time. So, it's headwinds, but I would say they are not catastrophic. It's just the market, at this juncture, really takes everything and amplifies those fears. It makes at the end of the world for just about anything that happens. That's not really the case right now. >> The big debate, obviously through the Summer, was at the rally that we were enjoying, through the tech space and more broadly across the equity markets, was the barren market balance or was it the start of something else? A lot of questions hanging over. This is been a law of rough sessions since last July. What you make of that rally? >> That took people for a spin. A sharp rally coming up in the quarter and then things just started getting back all those gains. We've been seeing and unwind that entire rally. So I think that what you have is very much fear heading into the quarter. Companies coming in reporting better-than-expected results. That fear coming off the table, but now, again, in between reporting periods, people just don't know right? What's happening? There's different economic data coming every signal day. Things are just in flux without any hard data points. Investors are, again, going into panic mode. >> Okay let's talk about the longer term then. If we look at historically the performances of these names. What can we expect in not the next several days but maybe the next several weeks… Longer term, what you expect? >> Longer-term the question is "can tech returned to outperform?" This is the big question we have seen. Illustrating this very phenomenon. 2017, 2018, 2019, tech stocks were in the driver's seat and doing much better than the rest of the market. Somewhere around mid 2020, you begin to have a tug-of-war between the other sectors. When that chart is going up, you can see that tech is outperforming. When it's going sideways, you really got this phenomenon of some days tech underperforming, some days outperforming. So longer-term, is that line going to go back to that positive slope again? That's the question. >> One of the actual fundamentals of it all? At the very basic of things, we invest in companies because we like their earnings potentially going forward. We want to take part in that success. What can we lean, and you have another chart as well with that information? >> Yeah. We invest in the long term and that chart has a positive slope. Something outperform something else when the earnings growth is better. Ultimately that's were looking for. So that's why the second chart is so critical read what you see in the second chart is, going back, the line for year-over-year growth in technology stocks, that line, which is the orange line in your screen, it starts to get higher than the rate of growth for the rest of the market. So no surprise that it is technology stocks that have outperformed that earnings growth and our share prices growth. But what you see up on your screen there, is as we came out of the pandemic, it's the rest of the market began to shine. That blue line over the orange line. Now, a big part of that is because those non-tech companies did so poorly during the pandemic. But still, earnings growth is better and the rest of the market and so other non-tech stocks are being rewarded. Million dollar question is cannot orange line regain and those technologies stocks show that potential are known for and give investors that comfort to welcome them back into investing in technology? >> Obviously investors when they saw that massive rise in technology stocks earlier the pandemic, it sort of got spoiled by some of those gains. Some of those are really high flyers and of course to get things outside his gains, you saw a pullback in the space. People talking about bubbles, crashes. If you're put perspective on a longer term, what is that space look like? Is it a little too alarmist? >> The great fear, Tim Hortons over the last few years. There was greed in 2020. A lot of highflying tech stocks really going to the moon. Right now they're reversing those gains. The narrative continues to be "influx" throughout the rest of the year. You have people saying there's a big crash coming. You have the people saying no we will have a sharp rebound and all-time highs in a matter of months. There are people in both camps. As I look at these businesses and read through the fund metals and think about 2001 three, 2004, I really don't see either of those scenarios. We have solid businesses like Microsoft and Apple and have a lot of good things going for them like any other business. Sometimes they have headwinds they are facing as well but it's a sector that is still full of pretty solid companies that should be able to deliver you that earnings growth in the long run. >> Will get deeper into some of these individual names later in the show but I think what the sector as a whole, these are technologies that we learn to live with. Although people got very excited in the beginnings of the pandemic, it's hard to see us saying of "I don't need that technology anymore". It's ingrained in our regular lives. >> Yes. That's very much the case. It doesn't take a lot to figure out who the big technology copies are and what products of their is that we use. All around us. In my pocket right now. >> We are surrounded. >> Exactly we are surrounded and there's a whole privacy conversation we can have. You are absolutely right. Sometimes investors say "look technology, there's something unique here and it doesn't have to have anything to do with the economy." And so as a result they expect the stocks and these earnings to grow, grow, grow. It's just a reminder when you are that big and pervasive in people's lives, well, guess what… As the economy slows, these businesses slow as well. >> Great start to the program. We will get to your questions about the tech sector with Vitali Mossounov in just a moment. Reminding you now you can get in touch with us any time by emailing us, MoneyTalkLive@td.com or fillet the viewer response box under the video player here on WebBroker. Now let's take a look at how the markets are trading. Shares of semiconductor giant Nvidia are in the spotlight today. After the company's in Washington told to stop exporting microchips to China they can be used for artificial intelligence processing. Nvidia said it was further informed by US officials the new rules are aimed at products that could have a military use. The California-based company sells the affected trips to China represented in $400 million for the current quarter. Jobless claims in the United States have hit their lowest level since last June. Rather late June. Seasonally adjusted claims for last week came in below estimates at 232,000. That suggests the US labour market is holding in despite fears of an economic slowdown as the Fed aggressively hikes borrowing costs. The report also comes one day ahead of the August jobs report which investors will be watching closely for the further signs on the health of the labour market. The company behind Swiss Chalet and The Keg is one step closer to being taken private. Fairfax Financial has signed a definitive agreement with Recipe Unlimited after first announcing the proposed deal last month. The take private agreement which still requires court and shareholder approvals values Recipe Unlimited at some $1. 2 billion. Now let's check on the main benchmark on Bay Street and Wall Street. The TSX Composite Index down 290 points. 1/2%. Let's check in the S&P 500. We are seeing broad based weakness right now a little bit off the low the session as well. We are back now with Vitali Mossounov from TD asset management. We are taking your questions about the tech sector so let's kick it off with this one about a Canadian company that's been in the news quite a bit. "What is your guest think about Shopify? Does he see its shares turning around question mark". >> That's a Cinderella story to the pandemic with e-commerce. Shopify was a real darling even before the pandemic came around. 30, 40 cup, 50% growth. Remarkable numbers and of course COVID supercharged all that. For two consecutive years. Now, it's coming back down to earth as you may not be surprised. Shopping online is still there but of course now we can head over to the store and get we need. So Shopify had a tough time because the world is changing. The second problem Shopify's having is really, investors this year, keen on profitability. More than they were in the past. Shopify's having some trouble demonstrating to investors how exactly the need to make money. They are making some pretty big investments in their logistics, warehousing and they still have that mantra of "we are going fast, where getting the right returns in our investments so we will continue to spend." Investors are telling them "we took your word for it for a number of years but we will need to prove to us you can be profitable one day." Shopify has not done that yet. I say that's the challenge they need to address in the second half of the year. >> Another one of those classic "show me" stories. We thought this huge surge we saw for this demand we had to offer during the pandemic since he pulled forward all of this activity that was expected to happen years down the road and it would stay that strong. And ultimately in the end, we made the wrong bed because the world shifted again. So it does, as you said, become one of those stories where you have to say "show me what you guys can do going forward." They sort of made the wrong bed in the early part of the pandemic. >> Exactly. Look, I don't want to be despondent on the business. Because as they report their second quarter, they did report it, they showed a lot of good things. We are still talking about 20% growth after two years. That's good but it's a big deceleration and there are question marks. I think investors are willing to look through the slowdown and they know that e-commerce is not going anywhere. That's fine. But it is to me, a topic of profitability that Toby and the team, that they have been called out by investors in the second half of the year. They will need to get in a conference call or whatever it is they need to do and address those questions. >> Fascinating stuff. Another question coming in. "What is your outlook for Microsoft and its cloud business?" >> Microsoft is doing pretty well and so are all the com businesses. Amazon, Microsoft and Google. Those are the three main ones. Microsoft specifically, doing very well. They are seeing headwinds but the headwinds are managing well. Foreign-exchange… Exposure to Europe of course over the course of this year. They are seeing some weakness in customer consumption trends at their cloud. Like large enterprises, just not building or using as many applications. All of that, relative to the strength of the overall business and the demand transition to the cloud is not a major headwind. So, Microsoft, halfway through the calendar year, they have proven their hands. >> Outside of the cloud business, Microsoft is a gaming console, other things. Are those the kind of things that can offset each other in challenging economic times? Or is the sort of all based on "the economy is good, people will need software and cloud? ". > It's tricky they don't quite have a business in there that if you say "if we go into a recession that business will get stronger about something it's weaker." Some people like to say when you don't have a job you tend to play more games. But I think that's a bit of a fairytale. You might play more games but you can afford the games. So you play the same games. So I would be careful with those assumptions. The bottom line Greg I think Microsoft is good for businesses, we know the different businesses, just like different stocks a portfolio, gives you diversification. And with that you are better at writing out the volatility. But at the end of the day, it's a $200 billion business that is tied to the health of the economy. Another question: what you think of alphabet after its latest earnings? >> Very much like Microsoft it is been a steady performer over the last decade. Now, more difficult set up, backdrop for Alphabet in advertising is cyclical. Advertising is cyclical in general. If we were sitting here seven or eight years ago, we could say "well there will be a recession but the age of advertising, there is still a small piece of the overall landscape so they will just take market shares from newspapers or whatever the case may be." That's not the case anymore. It is advertising. There is no one else to advertise but digitally. So alphabet is seeing a slowdown in demand for ads. Especially on YouTube, for example, somewhat of a court search. Still very much growing. They grew 10% and the exceeded expectations. The business is executing. But I think as we look towards the second half of the year, it's more pronounced of a story of investors having worries. Because of consumer spending. It doesn't up breaking, we've seen the economic data though. It's not. But it does happen. If it does, alphabet would be more exposed than Microsoft. >> Obviously digital advertising is key to the fortunes of alphabet. It's sort of the same question for Microsoft. A few things going on, are they all still sort of dependent on the economic cycle? >> More so. And I would say they have few things rather fewer things going on the Microsoft. Microsoft has a lot of applications with monthly subscribers. Companies like TD or anywhere else, so on and so forth. You have the cloud, you have gaming, many businesses. Alphabet has some things going on but really it's that search business that holds everything up. Beyond that, YouTube, a small cloud. So I'd say that if you're thinking about trying to rank your exposure to an epic an economic slowdown, alphabet is out there. More exposed to those forces than Microsoft. >> Fascinating stuff is always at home. Make sure you always do your own research before making investment decisions. We'll get back to your questions for a Vitali Mossounov in a moment's time. A reminder you can get in touch with us by emailing us, MoneyTalkLive@td. com. Now let's get to our educational segment of the day. If you follow markets closely enough you know deals can happen outside of the trading session. Hiren Amin, Senior Client Education Instructor at TD Direct Investing joins us now with a walk-through of this after-hours action and what it means for the platform. Hello. >> Hello Greg thanks for having me on and yes that is a timely question. We are in the thick of earnings at the moment and this can present opportunities. But with news often breaking before and after hours, today's highly connected world really requires a way to react. Market moving events happening… That's were extended training comes into the picture. This lets investors really acted quickly on news or events happening as it happens and makes for an extra indicator in predicting the open market direction. Extended training itself, occurs before and after regular training session. We know the regular training, regular trading session…they do vary between markets and venues but the majority of the extended trade to set themselves occur right around the regular hours. And this is due to the fact that most of the news that affects investors breaks shortly before or after they open and close on the exchanges. Now, here it TD Direct Investing, clients can be trading in the pre-session as we call it as early as 8 AM Eastern time, right up until the open of the regular session at 9:30 AM. The majority of the trades have been doing their things during this window of time. Similarly, in the post-sector, again the majority of the bulk of those trades will take place between 4 to 630. Now we would be remiss not to mention that extended trading does come with unique risks. We will go through a few of those: the first one is lower liquidity. During extended hours, there is lower trading volume and this often can lead to making it difficult to execute the trades. It also means there will be larger ask spread which can adversely affect the price of execution that you have and also make it harder to execute what is favourable or reasonable pricing. Second, you have to contend with this higher price volatility. We know volatility is generally the swing and price that you have over a trading period. Due to there being smaller number of participants in these sessions, trading can be quite, let's say, erratic and wild. This carries out to really wide prices. And finally, we will mention that your order may only be partially executed or even perhaps not at all as some stocks may not even have any trading happened during the extended trading hours there. >> Lots of good information and lots of good caveats to keep in mind. If someone listening to us right now wants to know how to participate using WebBroker in extended trading, how they go about doing that? >> Absolutely. To begin, to actually put an extended hours trade we will open our "buy and sell" window here. What I wanted to mention first was there is a few guidelines to understand for extended hours. First and foremost it will only be available for a security system on major US exchanges. So this also means that Canadian stocks may qualify, provided they are listed on the US exchange. Most major Canadian stocks are also in the US markets. So we will take an example. We will take the SPY the tracks the S&P 500. Any stocks considered to be penny stocks are traded on the OTC market, the other conditions and parameters, we have quantity and the condition type here when it comes to the price. It has to be limit. This is the only order time that is accepted during those extended hours. Limit orders mean you have to put in a price at which you either want to buy or sell the security for. We are going to stick in 385 based on the price of SPY. On the timeframe you choose, you want to go to the very bottom and you will see this new timeframe open up. This stands for extended market sessions. This is actually can give you full coverage of the session. So it's not choosing one of the other. You get the full coverage. So for us, for instance, were doing it just past the noon hour right now. It'll be less coverage until the regular session right up until 7 o'clock. A final word that I will say is, there is no extra cost for doing extended hours orders. They will be a standard commission just as you would do one for the regular session. There, you have on how to place an extended hours order. >> Fascinating stuff we appreciate you joining us. >> Thanks Greg. >> Our thanks to Hiren Amin, Senior Client Education Instructor at TD Direct Investing. Now we get back to your questions about the tech sector Vitali Mossounov but first a reminder of how you can get in touch with us. Send us your questions. There are two ways to get in touch with us. You can send us an email anytime, MoneyTalkLive@td.com or you can use the question box right below the screen on WebBroker. Just writing 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 now with Vitali Mossounov taking your questions with the tech sector. Here's one coming in: "what are your thoughts on Apple? Is there anything interesting coming down their product line?". That sounds like a good question. >> Yes I can't believe it's September. Apple has been always been very good ever since they launched the first iPhone. There is been an annual cycle of a new phone and they have launched many other products along the way to go along with it. So, we can have a repeat of that. Just in a weeks time. Apple is going to launch the new iteration of its phone. That's not quite as exciting I think of what it used to be in years past. Before everybody had a smart phone. Features were larger. There still a growth element to the iPhone install basis. Today there is a billion users of the iPhone and every single new release is more of a feature step up rather than something revolutionary. Before we had 5G, until they really get the AR headset, we don't know, they keep everything very secretive. There will be as much excitement about the iPhone until then. That's not great in the sense that I'm looking for a company that I want to grow 20 or 30%. But if you're looking for something that is a steady grower, everybody will need an iPhone and sooner or later they will need to update. Apple will be resuming out a little bit, consumer technology company this year, if you think consumers facing significant headwinds especially in some areas the world like Europe. Apple will just keep selling those phones. So they are hoping that the latest iteration of the phone will keep that going. >> That's order for the company firmly is now. In the years past, the whole steam job saying "I'm going to get the markets". They don't even know what they want until the told what there were wanting. That faced criticism as well. People saying "this phone is marginally better than my last phone but not changing my world or anything." It seems like they sold through all those criticisms. Are we talking in a big mature tech company now? >> Yes 200 to 250 million phones every year and the average user replacing the phone every four years or so. Not that different from other large consumer devices. Larger ones like a car, for example, most people that need a car have a car and it's just a matter of time that they replace it. So Apple has going for it, I would say, that innovation element that perhaps automobile companies of never had. Hence the disruption of that industry. That's a conversation for another day. But Apple does periodically give you the product if you didn't know you needed and again, Apple, very secretive to their research and development. But rumour has it that they are working on an automobile and they're working on probably a new device around glasses or headsets. So lots of exciting things on the pipeline for Apple. But will see that later in the decade. >> Before we go on to another one, one more thing about Apple than just occurred to me. We see non-tech retailers getting hit. The more people spend on food and energy, the less they are spending on these items. Do we consider a cell phone a luxury item? >> Yes I think it's a bit of a hybrid. On the one hand it is something that you, the Apple badge, I find, people proudly display put their phone on the counter and say "that's my Apple phone". There is a luxury element of it. One way to look at it is that price you pay for it, you do have to say to yourself "look, yes it's $1000. Yes it's an accepted device. But how do I pay for it?" Of course the vast majority of purchasers in North America, they pay their phones on a monthly instalment plan. 30, 40 and $50 a month is very different from $1000 at a time. Second of all, how much time you spend in your phone? I would say >> Too much! haha >> Many of us are putting down the phone and enjoying life head hence the slow tech sector. But if you do the math, that phone, you were getting pretty good value out of it on a per hour use basis. >> Whether it's an iPhone or anything else, the kind of stuff we do for a living, you tell your boss "I need to get in touch with you" and they say they don't have a cell phone, that's something we need to care about all the time. Let's take another question: Amazon's shares have been falling for the past year. Do you see that changing anytime soon? >> Yeah. Amazon is interesting in that they were like Shopify, of course, a pandemic beneficiary. Selling things online. We had little choice. And they saw their growth rates for business doing half $1 trillion by the way. We saw that jump 40%. … Over the second half of 2020, 2021, it was very good. And so it's been sort of sideways for quite a while. It's been interesting to watch. A lot of opinions about why and more recently, looking forward, we get to debates. The first debate is what the growth rate of Amazon is going to be. The deceleration that Shopify has, of course Amazon not being able to escape, they are reopening the physical retail. A number to call a profitability. For something that large with that much money coming in the door, that money of course going on various doors, paying salaries and building warehouses. But a little bit of that money is going out the door and says "shareholders" on it. A couple of debates with investors telling them "let's see profitability and see if e-commerce growth can stay here." >> One market they do have, I think, I call myself a middle-aged, grumpy shopping Father of two. I've always disliked the mall. But if I might be too small of a demographic to Target specifically for Amazon. >> You should go to that specific feature. >> The grumpy old man future? hahah >> Ha ha maybe don't look >> I'm curious now. I will take a look after the show. When do you see Facebook's push into the Metaverse actually paying off? That's a big question. The raven Facebook anymore. They're called Meta. >> I don't remember that name change happening on the chart but I don't think it was good outcome with share prices now. So, they are having to reinvent themselves. They can spend that a number of different ways. I think Meta and its management is looking around saying "Apple owns a device, Alphabet does to in a way with the android operating system. Amazon owns the consumer by virtue of the loyalty that comes through the logistics that they have. That unbeatable one day delivery. Medicine got none of that. Meta, Facebook, however you want to call it, what they have is perpetual exposure to a new app that could capture the imagination of the public and leave them struggling to copy it. That's not a good business note. So they've, they are investing to get the next device in your hands. I don't know if it's virtual-reality or how they'll figure it out. It's a long journey. They have of course, a billion users, I don't want to discount the quality of their current business. But I think that management is looking ahead saying they have to reinvent themselves but investors should know it's a multiyear journey. >> That's fascinating. I hadn't thought of it that way when you think of all these other tech names and what they give to the public and what Facebook has to figure out. It'll give to the public beyond sharing pictures of grandchildren. There is some criticism to that Facebook kept sort of shifting to an older demographic. My sons who are 19 and 17 don't have Facebook accounts and I don't think they ever did. >>the younger customers are the more they're likely to jump ship to the next shiny object. So they are stuck in his really difficult situation where, yes, I can grab the young user like I did a number of years ago but then SNAP comes along her tick-tock comes along and it never ends. So they need something permanent and I think the best they realize,the best kind of permanent is the device. You will be an Apple user let's say, as long as you live. >> Great points indeed will get back to your questions with Vitali Mossounov in just a moment time. As always, make sure you do your own research before making any decision that a reminder you get in touch with us anytime. Just email us@moneytalklive@td.com or you can use the question box right below the screen here on WebBroker. A little halfway past the lunchtime trading session. Let's check on the market. We've had money-losing to round out the month of August today. The start of September is no different. That Summer rally, being put to the test and starting last Friday with Jerome Powell's speech at Jackson Hole. Down right under duress these days. 19,038. Check any sector, financial textiles, the consumer side pretty heavy under pressure. … The consumer Staples. Even then, it is a modest gain. Let's check on the energy space. A bit of a tough couple of days for energy investors. You would think it was happening with the price of American benchmark crude, West Texas at 8693 down almost another 3%. A rough ride. Crescent .9 bucks, down a little more than 3%. Tough to be a miner today. . . . Kinross down more than four to half percent., South of the border, let's check in the S&P 500 right now, down 35 points. A little bit off the lows of the session. But still down almost a full percent. Even tougher, the tech heavy NASDAQ in terms of the hits in the downside. Down 1. 9%. And Devon Energy, the energy stocks on Wall Street, the force that we are seeing on Bay Street, right now Devon is down a little more than 3%. >> Back now with Vitali Mossounov taking more of your questions. What are your thoughts on cyber security? >> That type of security face the least of those, our spending is not really discretionary for customers. good results out of the major cybersecurity companies. We are talking about Palo Alto networks, crowd strike, very much the same messages. We are executing well the main. Things are strong and deals are getting signed. These next-generation cybersecurity stocks looked to be very well positioned for the second of the year. Even in declining macro and headwind and conversations about evaluations. Of course investors are there… Buying security stocks trading and premium. >> We have a dozen more questions for Vitali Mossounov. We have two say goodbye for this session but we will have them back soon. Our thanks to Vitali Mossounov, global tech and a support fully a manager to. We are having audio difficulties so we will say goodbye. Tune in soon we will have Daniel Ghali, Senior Commodity Strategist at TD Securities will be our guest taking questions about commodities. Thanks for joining us and we will see you tomorrow. [music]