The Nasdaq is up 17% so far this year, which is a fantastic return in four months. If you annualize that number (which you never would) gives you 48%, which is of course a very unlikely result for the whole year. This comes after a shocking 32% drop in 2022. But remember the math. If something falls 10%, it needs an 11% rise to get back to break-even. If it falls 50%, you need 100% to get back above water. In the case of the Nasdaq's 32% drop in 2022, it needs to recover by 47% to get back to even. So the Nasdaq needs to keep up the current run rate for the rest of the year to return to the levels of late 2021. Very unlikely! In Canada, I always harken back to Manulife shares. In October of 2007, its shares plummeted from $44 all the way down to $13 by February of 2009. That was a 70% drop. So the math to recovery? Manulife would have to climb 238% to get back to break-even. Today Manulife trades around $27, or 38% below its all-time high. Just a reminder that risk management (our stop losses) is an important tool. Stops don't always work the way we want, but have saved our clients lots of money over the years.

Should you have any questions or concerns, please feel free to reach out.

Portfolio Notes

(+) indicates a positive development, (-) indicates negative, and (~) indicates neutral

(+) Apple (AAPL-US) delivered better-than-expected quarterly results, with its installed base of active devices expanding to more than 2 billion. Apple's board authorized a program to repurchase up to $90 billion worth of stock, while raising its quarterly dividend to 24 cents a share. Owned in Core and US Portfolio.

(+) BCE (BCE-T) posted Q1-F23 results in line with expectations. Top-line wireless and wireline (CTS) operating revenue increased by 2%, supported by mobile postpaid ads of 42K. Overall revenue would have grown 5% if it were not for a one-time favourable media revenue adjustment last year. Growth did not fall to the bottom line as inflationary pressures caused CTS EBITDA margins to decline 160bps YoY. Management guided that EBITDA margins should recover in 2023 and maintained full-year guidance. Owned in Core and Cash Flow Portfolios.

(+) Berkshire Hathaway Inc. (BRK.B-US) reported in-line operating revenues of $85.4 billion, up 20.5% Y/Y. Cash and cash equivalents stood at $130 billion. The company bought back $4.4 billion of its stock during the quarter, up from $2.6 billion in Q4/22. We would continue to own the stock and be buyers here given the company’s diversification, lower risk-adjusted profile, earnings power and ability to grow its book value per share. Owned in Core Portfolio.

(-) Estee Lauder (EL-US) Management not only missed expectations but slashed the rest of its fiscal year outlook due to a slower-than-expected recovery in its travel retail business. While Travel Retail has been slower to recover and it will take time for inventory to normalize, what we found encouraging was the growth in the rest of the business. Estee Lauder’s ex-travel retail in Asia grew 10%, and Mainland China sales grew low single digits organically with market share gains. We are confident this business will come back as international travel by Chinese consumers rebounds. Owned in US Portfolio.

(+) Forits (FTS-T) delivered a headline beat relative to consensus expectations (EPS of $0.91 versus $0.82), however it looks like this is largely a function of timing. Specifically, FTS booked higher wholesale sales and FERC transmission revenues from its UNS Energy business (i.e., operations in Arizona). Looking ahead, management noted that earnings from UNS Energy should moderate in the back half of 2023. That said even after adjustments, earnings are above street estimates and therefore should be viewed positively in our view. The company also reiterated its five-year capex plan which in turn is expected to grow the rate base by ~6.2% on an annual basis. This of course is supportive of the 4-6% annual dividend growth guidance. FTS is trading at ~19.8x forward earnings, in-line with its 5-year average and fair in the context of the current macro backdrop in our opinion. Shares yield 3.69%. Owned in Cash Flow Portfolio.

(+) Restaurant Brands International (QSR-T) topped earnings expectations as Tim Hortons and Burger King sales outpaced consensus estimates. For the first quarter, the Canadian restaurant chain operator reported $0.75 in earnings per share, topping expectations. Owned in Core Portfolio.

(-) Starbucks (SBUX-US) The stock pulled back in reaction to the earnings result. Starbucks delivered a strong quarter, beating expectations on sales, margins, and adjusted earnings per share with North American comparable sales up double digits and China was an upside surprise with comps inflecting up 3% compared to guidance of a decline. When management simply reiterated its full-year outlook, calling for more moderated growth despite the strong quarter, investors were disappointed. Owned in Core and US Portfolios.

(+) SolarEdge Technologies (SEDG-US) staged a rally, with the solar products maker reporting better-than-expected earnings and revenue and saying supply chain issues have gradually improved. Owned in Core ESG+ Portfolio.

(+) Shopify (SHOP-T) soared on a series of positive announcements. First, SHOP announced a cost restructuring program that includes a 20% reduction in its workforce across all its divisions. In this slowing growth and rising interest rate environment, cost restructuring and layoffs have been magic words for the market. Second, the company's strategy to streamline its operations hit a new gear after disclosing the divestiture of its logistics business to Flexport. The idea of SHOP returning towards an asset-light model, while refocusing on its core growth opportunities, such as expanding its point-of-sale hardware offerings, is appealing because it should lead to stronger margins and profitability. On the topic of growth, SHOP outperformed expectations once again in Q1 as Gross Merchandise Volume (GMV) climbed by 18% on a constant currency basis to $49.6 billion, comfortably beating estimates. Better yet, the company's outlook for next quarter calls for stronger growth than analysts anticipated. Specifically, SHOP expects revenue to grow at a similar rate to Q1's 25% growth on a yr/yr basis, several percentage points higher than current projections. Furthermore, Q2 operating expense dollars -- excluding one-time items related to the logistics business divestiture - are expected to decrease by a mid-single digit percentage compared to Q1. Owned in Core Portfolio.

(+) Telus (T-T) posted strong mobile network and fixed data services revenue growth of 7.6% and 6.7%, respectively, supported by solid mobile and internet net additions. Mobile revenue increased due to increased roaming revenue through volume and a 16% price increase. Technology Solution's EBITDA margin was under more pressure than Bell's, declining 370 bps YoY. Management also maintained full-year guidance. Owned in Core and Cash Flow Portfolios

Weekend Reading

Death of a Flywheel How Amazon and Berkshire got too big NAPKIN MATH

Comparing the Speed of Interest Rate Hikes (1988-2023) VISUAL CAPITALIST

Repeated Lessons in Buffett’s Partnership Letters Warren Buffett’s Partnership Letters hold a number of lessons for everyone. Some stand out more than others because he repeats them throughout the letters. Those lessons are worth repeating again. NOVEL INVESTOR

For Apple, It’s All About the Active Device Base Apple's active device base which grew in the quarter to over 2 billion. DEEPWATER MANAGEMENT

The new industrial policy, explained We're starting to learn what replaces the old free-trade consensus. NOAH OPINION

Taking on Ticketmaster A new bill introduced in California would ban exclusive contracting in the ticketing industry, a direct attack on Ticketmaster. BOONDOGGLE

Gaining Steam Canada’s ruling Liberal Party had done a complete about-face on its support of nuclear power. DOOMBERG