Markets have finally hit some turbulence, but this is typical in most years. The broad market indices have been in a negative mood over the past few weeks. Here are the drawdowns: Dow Jones -5.30% (making it flat on the year), Nasdaq -5.67%, S&P 500 -4.82% the TSX -3.00%. Even bonds have been under pressure as inflation concerns persist. The iShares Core US Aggregate Bond ETF (AGG-US) is off -4.00%. The Canadian dollar is off -3.78% versus the US Dollar. While large cap stocks and bonds are in a shallow drawdown, small caps are back in bear market territory. The Russell 2000 is 20% below its record high. But history should show that this negative period should likely be nearing an end. As Jeffrey Hirsch of Stock Trader's Almanac fame points out, this chop may be temporary. He points out that the 2024 S&P 500 performance is the 3rd best first quarter in an Election year since 1950 tracking. The good news, there are only 2 instances of losses in the last 7 months of election years since 1950. They were the years 2000 & 2008. It is my stance that the fundamental case for stocks in 2024 remains intact, supported by strengthening earnings, a strong economy and nearly $6 trillion of cash on the sidelines.

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

Portfolio Notes

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

(+) Blue Owl Private Credit (ICN101RF) The fund's investments are predominantly floating rate, first-lien, senior secured loans with low loan-to-values. It can offer diversified portfolios yield enhancement, negative correlation to interest rates, reduced volatility, and exposure to 300 companies across 25+ less-cyclical industries. The master fund recently announced its first special distribution in 2024 for shareholders of record as of March, payable by the beginning of May to OCIT investors. Since inception, OCIT has generated an annualized total return of 10.31%; with equity-like returns with substantially less volatility. Year to date, OCIT has outperformed traditional fixed income and high yield by 1300 bps and 1200 bps, respectively. OCIT delivered positive results in February posting total returns of +0.79% and continuing its strong momentum from 2023. The total annualized monthly distribution rate is 9.52%. The overall health of the portfolio is strong and credit quality trends remain stable. Owned in Cash Flow Portfolio.

(+) Eli Lilly (LLY-US) The stock moved higher following the pharmaceutical giant’s announcement that its weight loss drug Zepbound showed the potential to treat patients with obstructive sleep apnea. Its GLP-1 agonist Zepbound (tirzepatide) succeeded in two late-stage trials assessing it for the treatment of patients with obesity and obstructive sleep apnea. Citing topline data, Eli Lilly said tirzepatide significantly reduced the apnea-hypopnea index in the trials, thus meeting the primary endpoints. Lilly intends to submit the data for publication in a peer-reviewed journal and share the results with regulators such as the U.S. Food and Drug Administration beginning mid-2024. Owned in Core, ESG+, Cash Flow and US Portfolios.

(+) Intuitive Surgical (ISRG-US) Revenue of $1.9B in Q1 was an 11% rise from the year-ago period. Net income was $547.4M in the quarter compared to $360.8M in Q1 2023. During the first quarter of 2023, the Company saw COVID-19 resurgences impact da Vinci procedure volumes in China. Additionally, the high patient treatment backlogs that developed during the COVID-19 pandemic contributed positively to the 2023 procedure volumes, as those patients returned for diagnosis and treatment. Globally, da Vinci procedures grew 16% compared with Q1 2023. Owned in Opportunity Portfolio.

(+) Louis Vuitton (LVMUY-US) didn't have the hottest quarter, seeing its slowest sales growth since the pandemic rebound. Their fashion and leather goods division, including big names like Louis Vuitton, only managed a 2% bump to EUR10.5 billion in the first quarter, compared to the 18% surge seen a year back. Overall, group sales ticked up 3% to EUR20.7 billion, meeting expectations. But currency swings made the numbers look less glossy. Blame it on the cool-off in Chinese demand for high-end French fashion and champagne. Sales to Chinese customers globally rose by about 10%, but it wasn't as crazy as the post-lockdown frenzy in 2023. Even powerhouse brands like Dior and Louis Vuitton only managed around 2% sales growth. Sales in watches and jewelry took a hit as well, especially Tiffany, which focuses a lot on the US market. Their wines and spirits had a tough time, with sales down 12%. Shares were up on the news and have done well over a longer period. This continues to be a great holding. Owned in Core and Cash Flow Portfolios.

(-) Netflix (NFLX-US) The streaming company's shares fell even though Netflix's quarterly results topped forecasts. The stock had risen more than 25% this year ahead of the earnings report, and Netflix's projections for revenue this quarter weren't as rosy as analysts' expectations. Netflix reached 270 million members. With more than two people per household on average, they now have an audience of over half a billion people. No entertainment company has ever programmed at this scale and with this ambition before. Netflix added that it plans to stop providing quarterly membership data and average revenue generated per member. Owned in Core and ESG+ Portfolios.

(-) Prologis (PLD-US) reported a revenue beat and in-line Core FFO. The slowing economy led to a mild deterioration in average occupancy (96.8%) and retention (74.3%), which drove same-store NOI growth to 5.7% Y/Y. Given the weaker environment, PLD modestly lowered its 2024 Core FFO guidance range, which is a disappointment. PLD is down 14% year-to-date, underperforming the S&P 500. The stock trades at a forward P/AFFO multiple of 22x, a discount to its historical long-term average of 27x. The long-term thesis is for continued growth in e-commerce and supply chain modernization. We would continue to own the name and be buyers at these levels. Also attractive for yield oriented investors with a 3.3% dividend yield. Owned in US Portfolio.

(-) Taiwan Semiconductor (TSM-US) The Taiwanese chipmaker fell despite beating revenue and profit expectations in the first quarter. The company reported no structural damage from the earthquake in Taiwan earlier in April but noted some wafers “had to be scrapped.” Most of the lost production will be recovered in the second quarter, according to management. TSMC forecasts healthy growth in 2024 and guided second-quarter revenue to a range between $19.6 billion and $20.4 billion. Owned in Core, ESG+, Cash Flow and Opportunity Portfolios.

(+) The Trade Desk (TTD-US) shares were higher on a preview from Morgan Stanley for earnings in the space. There are three themes to look for in ad tech heading into the first-quarter results, analyst Matthew Cost. Mobile app ads are at an "uncertain juncture," with consumer spending on mobile games improving recently, but "we continue to believe that after 2 years of outperformance, in-game advertising growth will likely decelerate more in line with consumer spending over time," Cost wrote. Meanwhile, deprecating cookies on Google's Chrome browser is still set for later this year and that could spur "broad aftershocks" for ad-tech. The risks are likely limited, but it's time to monitor what the players say they will do in testing cookie less solutions, as well as any changing tone from them through the year as the move gets closer. And CTV remains important and is expected to grow about 32% this year, Cost wrote. "As we approach 1Q earnings, we look for updates on ad budget shift as well as any accelerated shift to programmatic buying which some major publishers have highlighted intra-quarter," as well as more about any new tools to drive results. Morgan Stanley is still bullish on The Trade Desk thanks to strong ad markets and tailwinds from the CTV shift; any potential volatility on Prime Video ads/cookies is "short-term" and likely to create buying opportunities. Owned in Opportunity Portfolio.

Weekend Reading

The Forgotten War on Beepers Before smartphones, beepers were in the crosshairs of parents, schools, and lawmakers. PESSIMISTS ARCHIVE

Can Generative AI be the Next Transformative Force for China’s Internet Giants? The many ways China internet companies are already implementing generative AI and the technology’s potential revenue impact. KRANESHARES

TimeGPT The first foundation model for time series, capable of generating accurate predictions for diverse datasets. TIMEGPT

Lucky vs. Repeatable This piece from Morgan Housel was a welcome reminder on how to think about luck. Luck plays a huge role in many success stories. MORGAN HOUSEL

New York and Boston Boston is a loyalty town. New York is an integrity town. JARED DILLIAN

Why are we so divided? Zero-sum thinking is part of it. Researchers examine who embraces mindset that one’s gain is another’s loss, and how that affects our politics — in sometimes surprising ways. HARVARD GAZETTE

Salary vs Dividends in Canadian Corporations Paying Yourself as a Small Business Owner MILLION DOLLAR JOURNEY

Monster Beverage: A Beast Unleashed Energy drinks and ~200,000% stock price appreciation. THE SCIENCE OF HITTING

What Bitcoiners Are Saying About the Upcoming Bitcoin Halving Is the halving priced in or not? Will it disrupt the bitcoin mining industry? Or accelerate adoption? Here's what experts and community members are saying about the fourth — and perhaps most anticipated — halving. COINDESK