The twice-impeached, multiply indicted, and once-defeated former president of the United States overcame 34 felony convictions, accusations of insurrection and civil-lawsuit judgments totaling more than a half-billion dollars to win back the White House. Of the counties with nearly complete results, more than 90% shifted in favor of Trump. He not only improved on his 2020 margin, but early results showed that even a number of states where Harris was ahead had shifted right. Even city-dwellers moved more towards Trump. The market has responded to the resounding Republican victory exactly as one would have guessed. For the market, Donald Trump’s big victory means a stronger dollar, more M&A, less regulation, crypto utopia, and higher deficits, inflation, and tariffs. All of that played out neatly on Wednesday. A monumental $22 billion flowed into U.S.-listed ETFs on Wednesday, said State Street Global Advisors. That marked record inflows for the day after a U.S. presidential election, shattering the previous $4 billion record inflow seen in 2020 on the day after President Joe Biden was elected. Investor appetite for risk-taking also showed up in the $4 billion of bond ETF inflows on the day after the U.S. election. But we are entering a period of additional uncertainty. Front and foremost, investors should expect tariffs and likely higher fiscal deficits. On the positive side, we expect a less oppressive regulatory oversight which should favor corporate entities, so essentially equities over bonds. Countries such as Canada and Mexico may well be collateral damage in the ongoing U.S. protectionism towards China. On trade, investors should be aware the U.S. trade deficit with Canada and Mexico has widened almost US$100 billion since Trump left office. Trump has promised a universal 10% blanket tariff on all imports, and even with USMCA on our side there is always the possibility of future tariffs on Canadian goods under a Trump presidency. To be clear, an America First policy is meant to increase economic activity in the U.S., and this typically has positive readthroughs for the Canadian economy. This will be mitigated by some of the trade issues and Canada’s disappointing commitment to defense spending. Nevertheless, a host of Canadian companies have large US operations and could benefit if some of the more aggressive spending and corporate tax cuts are implemented. After an initial boost to stocks, we would expect the macro environment to be the driver. S&P 500 corporate earnings remain solid - up in the current quarter by 5% - and we have Central Banks largely moving to lower short rates. Bottom line: Trump likes to use markets as a measure of his performance so this should be a reasonable environment for stocks. The next milestones to look out for in this election cycle are who Trump nominates in key positions, and the sequencing of policies.

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

Portfolio Notes

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

(+) Axon Enterprise (AXON-US) reported significant achievements in Q3, including a 50-60% reduction in report writing time due to DraftOne, launch of a new AI era plan, and traction with Taser 10 and VR training. The company achieved record bookings exceeding $1 billion, indicating strong demand across its product lines. Revenue grew by 32% year-over-year with a strong adjusted EBITDA margin of 26.7%. International and U.S. Federal bookings saw substantial increases, with Taser revenue growing by 36%. Axon raised its Q4 and full-year revenue and adjusted EBITDA guidance, demonstrating confidence in continued strong performance. Owned in Opportunity Portfolio.

(-) BCE (BCE-T) The quarter itself was relatively in-line; however we would flag that wireless remains under pressure supported by declining average revenues per user and lower-than-expected net adds. As a function of the competitive environment, BCE reduced its FY24 guide. Overall, lots going on with BCE these days from weaker fundamentals to the company's new venture into U.S. fiber. They announced a $5 billion acquisition of Ziply, a fibre-based operator in four U.S. states. The company has essentially swapped its minority interest in MLSE, which was generating minimal cash flows, for control of fibre assets. On paper, the strategy makes sense, but there are key issues to consider. Firstly, the acquisition looks expensive. Second, it is dilutive to FCF. As a result, BCE is pausing its dividend growth, offering a discount on its DRIP, and will issue shares from the treasury. We have lower conviction in BCE these days driven in part by its high leverage, high payout, and risks associated with paying a high premium to break into the U.S. market. Shares yield a whopping 10.7%. Owned in Cash Flow Portfolio.

(~) Berkshire Hathaway (BRK.B-US) delivered a weaker than expected Q3 earnings report. The insurance business saw a higher-than-expected combined ratio largely offset operational improvement at GEICO, while BNSF and the Energy business also delivered weaker than expected results in the quarter. Of note from the quarter, Berkshire continued to reduce its position in Apple, which contributed to the growth of its cash hoard, which now tops $325b in cash and equivalents. The company possesses a diversified collection of attractively positioned business and investments, backed by a fortress balance sheet, with incremental upside provided by the intelligent deployment of capital. The stock trades at a forward P/B of 1.6x, a slight premium to its long-term average P/B of 1.4x. Owned in Core, ESG+, and US Portfolios.

(-) Boardwalk Real Estate Investment Trust (BEI.UN-T) reported a penny ahead of the street driven by stronger underlying rents. Same property NOI was up +13.5%, offset by a slight decline in occupancy. All-in, multi-residential REITs should continue to benefit from healthy mark-to-market opportunities, however slowing immigration is certainly a headwind and therefore, lower growth rates should be applied in our opinion. From a valuation standpoint, BEI.UN is trading at an implied cap of 5.5% which is in-line with KMP.UN. Shares yield 2.01%. Owned in Cash Flow Portfolio.

(+) Cameco Corporation (CCO-T) Q3 produced a headline miss, which RBC CM believes is largely due to sales timing. Their 2024 outlook remains largely intact. Nuclear (and, by extension, uranium) is increasingly accepted as a crucial component of a lower-emissions energy future, which is great for the CCO narrative but also attracts a certain kind of investor. Revenue for 2024 is now forecast to come in at between C$3.01 billion $3.16 billion, including C$2.55 billion to C$2.68 billion from uranium, where the company previously anticipated C$2.85 billion to C$3 billion in overall revenue. Cameco aims to sharply lift its dividend in the coming years on the back of improved cash flow generation and rising market prices for uranium. The company said it was recommending a dividend growth plan to its board under which it would at least double last year's payout of C$0.12 a share to C$0.24 over 2023 through 2026. That would mean annual increases of at least C$0.04 a share. It comes after Cameco's board in 2022 raised the dividend by 50% to reflect an improved financial performance. Owned in Core and Opportunity Portfolios.

(~) Canadian Pacific Kansas City (CP-T) Under a new Trump administration, U.S.-Mexican trade will become a question mark, which impacts CP. In 2023, 17% of CP's revenues were tied to US-Mexico cross-border traffic, but most of that originated in the U.S., which is likely safe (mostly grain, energy, and steel). Mexico originated shipments are mostly food, intermodal, and autos. Autos appear to be the biggest risk (1/3rd of CP's auto franchise, but autos as a whole is <10% of CP's total revenues). Risks will hinge on Canada's (and Mexico's) ability to broker some form of exemption from Trump's expected tariff rollouts, which is still a big unknown. In the meantime, there may be a pull-forward in freight volumes as retailers/manufacturers get ahead of future tariffs. Owned in Core and ESG+ Portfolios.

(-) Ferrari RACE-US) RBC said they would be buyers on Ferrari's 7% pullback. Q3 was impacted by a planned ERP implementation and Q4 will not downshift as implied by the floor of the '24 guidance. Importantly, the F80 supercar will start deliveries in Q4/25, which along with the November Investor Day, should be an important catalyst. We also heard management clarify that its guidance is really a floor and not an absolute level. In prior years, Ferrari provided guidance ranges and in Q3, the company typically raises it. Given the 'greater than' language in the '24 guidance disclosure, analysts should not interpret this to mean a Q4 sequential downshift, as the floor level of the guide would imply. In regard to the air pocket issue in early 2025, this could play a role, but we expect other ramps, including the 2 SF90XX vehicles (coupe and spider) as well as the 12Chillindri to offset. Owned in Opportunity Portfolio.

(+) Hydro One (H-T) Another clean quarter with EPS coming in ahead of consensus by virtue of higher regulatory rates and electricity demand. Management maintained its medium-term guidance, which implies a CAGR of 5-7% over the 5-year period ending in 2027. Dividend growth should approximate EPS growth while targeting a conservative 70-80% payout ratio. Things seem to be “all good” over at H, which is reflected in the company’s 22x P/E multiple relative to peers at 15-18x. Shares yield 2.68%. Owned in Cash Flow Portfolio.

(+) Killam Apartment Real Estate Investment Trust (KMP.UN-T) delivered an in-line quarter and bumped its distribution by 3% to $0.72/unit annualized. Rent growth on turnover was healthy at >20% with the mark-to-market rent opportunity on the portfolio overall at 22%. Canada’s lowered immigration targets will undoubtedly weigh on growth but there still looks to be decent growth here in the near-term as a more balanced housing market will take some time to achieve. Shares yield 3.78%. Owned in Cash Flow Portfolio.

(+) Monster Beverage Corporation (MNST-US) reported a record Q3 net sales of $1.88 billion, marking a 1.3% increase year-over-year, alongside a slight improvement in gross profit margin to 53.2%. However, the company faced challenges with increased operating expenses, leading to a 6% decrease in operating income and an 18.1% fall in net income. The negative impact of foreign exchange rates on net sales was approximately $62.8 million. Despite these challenges, Monster implemented a 5% price increase in the US to improve profitability and continues to lead in market share within the energy drink category. The company also highlighted its innovation efforts with new product launches and a positive sales outlook for October 2024. Owned in Opportunity Portfolio.

(+) Nvidia (NVDA-US) After the close last Friday, the folks at Dow Jones said they’re kicking Intel out of the Dow Jones Industrial Average, and Nvidia will be taking its place. The switch will take place on November 8th, 2024. This is the kind of news item that isn’t so important in itself, but it confirms a long-term trend already in place. Shares of Nvidia are up 130% this year while Intel has been cut in half. The AI Revolution has finally come to the Dow. The DJIA used to have a lot of heavy-industry stocks, but it has become more tech-focused in recent years. In February, they added Amazon to the DJIA. Apple, Microsoft and Cisco are already members. Being invited to join the Dow is Wall Street’s version of being a “made man.” It says you’ve arrived. Nvidia probably helped itself earlier this year when it announced a 10-for-1 split. The company just passed Apple to become the most valuable company in the world. There’s an important distinction between the S&P 500 and the DJIA. The S&P 500 is weighted by market value, but the DJIA is weighted by price. To calculate the Dow, you simply add up all the share prices and adjust it by a divisor. Roughly speaking, every $1 in share price of a Dow stock works out to about 6.5 Dow points. Size doesn’t matter. Owned in ALL Portfolios we manage.

(+) Palantir (PLTR-US) The cybersecurity stock surged over 20% on strong third-quarter results. Palantir reported 10 cents earnings per share on $726 million in revenue. The company cited “unrelenting AI demand” and a 30% jump in revenue from the prior year. The U.S. business is growing faster than the company as a whole, with its revenue up 44% in the latest quarter relative to a year before. U.S. commercial revenue was up 54%, while U.S. government revenue was up 40%. Owned in Opportunity Portfolio.

(+) Pembina Pipeline (PPL-T) PPL’s EBITDA was in-line with RBCCM’s estimates but came in about 4% below the street. At first glance, it looks like the delta was driven by lower-than-expected tolls and volumes on new contracts at the Cochin Pipeline. Conversely, marketing posted a healthy beat, however, recall that this is a volatile earnings stream and therefore is less impactful on the movement in the stock price. On a more positive tone, PPL narrowed its 2024 EBITDA guidance range, citing the company remains well positioned to capture the growing volumes from western Canada. All things considered; it’s been a good year with the stock returning more than 30% year-to-date. Shares yield 4.82%. Owned in Cash Flow Portfolio.

(+) South Bow (SOBO-US) The crude-oil pipeline infrastructure company said its board has declared an initial dividend of 50 cents per share, which will be payable on Jan. 31, 2025, to shareholders of record at the close of Dec. 31st. The new dividend, $2 per share on an annual basis, represents a dividend yield of 8.4%, based on the stock's recent closing price. Last month, South Bow launched as an independent company after being spun off from TC Energy. Owned in Cash Flow Portfolio.

(+) Telus (T-T) proved why it’s the best house in a bad neighborhood, with a solid set of Q3 results, as EPS and EBITDA both came in ahead of consensus. Revenue and EBITDA growth of 3% and 6% y/y, respectively, was better than peers. Average revenue per user (ARPU) was flat sequentially, which should be viewed favorably given competitive pressures, and sequential ARPU declines for both BCE and RCI.B. Telus raised the dividend by 7% and also committed to a 10% capex intensity in the coming years. This is important, because it underlines expectations for a much stronger free cash flow profile for Telus vs peers. BCE will be running at a capex intensity of 16.5% and RCI.B at 20%, which hinders their cash flow flexibility for things like deleveraging, potential turn-off of the DRIP, buybacks, dividend increases, etc. One item that might limit the enthusiasm on Telus though was the reduction in revenue guidance to slightly below the lower end of the original range. Overall, Telus remains our preferred pick for exposure to the sector. Shares yield 7.16%. Owned in Cash Flow Portfolio.

(-) The Trade Desk (TTD-US) reported a 27% year-over-year revenue growth in Q3, driven by strong performance in Connected TV (CTV), which remains the fastest growing channel. The company has secured over 40% of its business under multi-year joint business plans with leading agencies and brands, indicating a stable revenue outlook. Retail media emerged as a rapidly growing area, with significant opportunities in measurement and attribution for CPG advertisers. International spend growth, particularly in EMEA and Asia Pacific regions, outpaced North America, highlighting global expansion. The Trade Desk also provided a confident Q4 revenue forecast of at least $756 million and announced a $54 million share repurchase program, underscoring financial strength and commitment to shareholder value. Shares dropped on some profit taking. Owned in Opportunity Portfolio.

(-) TransDigm Group (TDG-US) TransDigm Group Incorporated designs and supplies aircraft components globally. They reported earnings of $1,149M (with a 52.6% margin) compared to our estimate of $1,134M. Total sales grew 18%, and adj. EPS grew to $9.83, compared to our estimate of $9.24. In terms of end markets, the fiscal 4Q24 growth in the commercial OE market was 13%, up 8% in the commercial AM, and up 16% in the defense market. The defense market growth was better than expected, but the commercial AM growth at 8% was softer than our expectations. Note that after several years of outperformance, the FY24 AM growth, at ~12%, was below the initial guidance of up mid-teens. Consistent with prior quarters, we also expect a focus on capital allocation, the M&A outlook (which should now be looking more constructive) and the ongoing cost and efficiency actions the company is taking. Owned in Core, Cash Flow, and US Portfolios.

(+) Viking Therapeutics (VKTX-US) The drugmaker soared after announcing promising results from its experimental VK2735 obesity pill, including weight loss of up to 8.2% within a four-week period. The drug is classified as a GLP-1, which could put the company in competition with Novo Nordisk and Eli Lilly. Owned in Opportunity Portfolio.

(+) WSP Global (WSP-T) delivered an in-line quarter featuring organic net revenue growth of 7% y/y. Management updated ‘24 guidance to reflect the POWER Engineers acquisition, which closed on October 1. Integration costs related to POWER were revised ~$80mm higher but we can live with that as we view this as a very strategic acquisition that positions WSP to benefit from outsized growth in the U.S. power and electricity space. We would highlight that the bulk of stimulus dollars have been directed to “red states” and any desire to boost domestic manufacturing capacity could surface additional opportunities for WSP. WSP trades at 14x EBITDA, a premium to its 5YA of 12.5x that reflects above-historic organic growth with the capacity for complementary M&A. Owned in Core Portfolio.

Company of the Week: Axon Enterprises

AXON DECK

Weekend Reading

2024 U.S. Election Highlights A new chapter begins. Chief economist Eric Lascelles shares his thoughts on the post-election day landscape and provides some highlights on what to expect next. WATCH

The Day After — Washington in Shock Greg Valliere Chief U.S. Policy Strategist, AGF Investments VALLIERE

Smart people cooperate The results of these experiments all pointed to the same thing. Smart people cooperate, and dumb people compete. KLEMENT

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A Financier Penned a Crime Novel. Prosecutors Want to Know How Much Was Fiction. Jay Newman, who steered Elliott Management to a $2 billion payday over Argentine debt, also had contact with an alleged hacking mastermind. WSJ

Why Streaming Subscription Prices Will Continue to Rise You are a user—so get ready to be used. HONEST BROKER

Links in Progress Harry Rushworth gives his update on new physical infrastructure being built around the world – tunnels, ports, canals, and more. WORKS IN PROGRESS