Bob Farrell was a Wall Street veteran with a long career as a technical analyst with Merrill Lynch is starting back in 1957. Even though Mr. Farrell studied fundamental analysis under Gramm and Dodd, he turned to technical analysis after realizing there was more to stock prices than balance sheets and income statements. He became a pioneer in sentiment studies and market psychology. His 10 rules on investing stem from personal decades of experience with dull markets, bull markets, bear markets, crashes, and bubbles. In short, Bob Farrell has seen it all and lived to tell about it.

1. Markets tend to return to the mean over time. [Trends that get overextended in one direction or another return to their long-term average.]

2. Excesses in one direction will lead to an opposite excess in the other direction. [Markets that overshoot on the upside will also overshoot on the downside, kind of like a pendulum.]

3. There are no new eras – excesses are never permanent. [There will be a hot group of stocks every few years, but speculation fads do not last forever.]

4. Exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways. [A strong trend can extend for a long time.]

5. The public buys the most at the top and the least at the bottom. [The average individual investor is most bullish at market tops and most bearish at market bottoms.]

6. Fear and greed are stronger than long-term resolve. [Don't let emotions cloud your decisions or affect your long-term plan. Prepare for different scenarios.]

7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names. [Breadth is important. A rally that lifts all boats is important.]

8. Bear markets have three stages – sharp down, reflexive rebound, and a drawn-out fundamental downtrend. [Wait and watch before getting enticed back in too early.]

9. When all the experts and forecasts agree – something else is going to happen. [Incorporate a contrarian streak into your philosophy.]

10. Bull markets are more fun than bear markets. [Wall Street, Bay Street and Main Street are much more in tune with bull markets than bear markets.]

Even the best trading and investment edges still lose money some of the time, but this does not negate their value. The very best human traders still lose money on something like 40% of their positions. But … They tend to cut those losses early and let their winners run. Which is why they are successful. A real edge comes from anticipating what others will do in the future. Searching for and maintaining an investment edge can seem daunting, but it is important to remember that perfection is not the goal. Rather, we’re just trying to shade the odds in our favor, over many market cycles.

Should you have any questions or concerns, please feel free to reach out. In the meantime, be sure to click this link for some excellent insight form RBC:

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

Portfolio Notes

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

(-) Alphabet (GOOGL-US) The government's proposed draconian breakup of Google won't be presented in court until the spring. Plus, the appeals process may not even begin until the middle of 2026. By then, Google may implement some European-style changes, like a box that shows users alternative search engines when they set up devices, that will appease regulators. Shares of Google parent Alphabet got dinged, but there's no reason to sell the stock. Owned in Core, ESG+ and US Portfolios.

(+) AppLovin (APP-US) Shares popped after Piper Sandler initiated coverage of the mobile app developer with an overweight rating. The firm set a price target implying the stock has upside of nearly 25% ahead, even after it already surged more than 700% in 2024. In the past month, AppLovin Corporation has experienced significant positive momentum, marked by a strong Q3 2024 performance that exceeded earnings and revenue estimates, leading to a substantial surge in its stock price (11/06/24). The company announced a $2.3 billion stock buyback, further boosting investor confidence (11/07/24). AppLovin's advancements in AI-powered advertising have been a key driver of its growth, with multiple analysts raising their price targets and upgrading their ratings for the company (11/08/24). Additionally, AppLovin is set to join the Nasdaq 100, replacing Dollar Tree, which is a testament to its growing prominence in the market (11/09/24). Owned in Opportunity Portfolio.

(+) Cameco (CCO-T) RBCCM and RBC Imagine are out with a Nuclear deep dive going over the demand drivers and subsequent lack of supply with forecasting going out to 2040. We have been talking about this uranium supply issue for some time and the stocks and price of uranium have been bid up. The report further unpacks requirements to meet this demand and the potential execution risks that come with it (65% of new supply coming from only 3 projects). Given this supply/demand dynamic, the market is very vulnerable to supply shocks, and has been prevalent in the stocks, they tend to swing on headlines. That said, at this time much of the sentiment is driven around bringing on supply and any hiccups or green shoots in projects, mining, permitting etc, will likely impact the stocks and uranium price in potentially disproportionate ways. The President-elect's pick for Energy Secretary, Chris Wright, has previously made comments supporting nuclear power, stating shortly before the election that the US should increase nuclear's share of overall power generation from 4% to 10%. On the back of this, RBCCM has raised the CCO price target by 20%. Owned in Core and Opportunity Portfolios.

(+) Cheniere (LNG-US) The daily charts of the generic Natural Gas futures contract have just broken out of a lengthy consolidation period for the first time since October 2023. In the past month, Cheniere Energy has been in the spotlight for several key developments. The company reported strong third-quarter earnings, beating estimates despite a dip in profits due to lower LNG and gas prices (10/31/24). Cheniere also raised its financial guidance for 2024, reflecting confidence in its future performance (11/01/24). Additionally, the company increased its dividend by 15%, signaling a commitment to returning value to shareholders (10/29/24). Furthermore, Cheniere received approval from the Federal Energy Regulatory Commission (FERC) to start a new LNG supply line, moving closer to launching its Texas LNG export operation (10/17/24). These developments suggest a positive outlook for Cheniere Energy, with strategic expansions and financial growth initiatives underway. Owned in US and Opportunity Portfolios.

(+) Deere (DE-US) shares jumped after the maker of agricultural and construction equipment beat earnings estimates in its fiscal fourth quarter. Net income was $1.25 billion, or $4.55 a share, for the three months through October 27, down from $2.37 billion, or $8.26 a share, a year earlier. Tight cost controls and lower production costs due to easing inflationary pressures led to the sizable EPS beat. DE's sizable earnings beat highlights the company's top-tier execution amid a steep down cycle that has shown no signs of reversing any time soon. Once the impact of lower interest rates does trickle through the economy, though, DE stands to be a major beneficiary. Owned in US Portfolio.

(reduced) MicroStrategy (MSTR-US) We have taken profits on two occasions this week. Shares tumbled Thursday after Andrew Left’s Citron Research said it’s betting against the software company, which has effectively transformed itself into a Bitcoin investment fund. The stock fell 16%, marking its worst day since April 30 all during an extended rally in Bitcoin as it approaches $100,000. Under Chair Michael Saylor, MicroStrategy has become nearly synonymous with Bitcoin after it snapped up billions of dollars of the cryptocurrency, sometimes selling debt to finance the purchases. But with the rollout of Bitcoin ETFs, investors can buy such funds directly instead of using MicroStrategy’s stock as a publicly traded proxy.

(+) Netflix (NFLX-US) After the glitches while watching the Tyson vs. Paul fight many were worried about the share reaction this week. They did great. They rose close to 10%. The record close came after the streaming giant announced that Friday’s marquee live boxing event featuring YouTube personality Jake Paul and former heavyweight champion Mike Tyson had drawn 108 million global viewers. They said it was the most streamed global sporting event ever. On several occasions during the fight’s undercard, Netflix experienced technical difficulties, leading customers to voice frustration on social media. But many of those technical difficulties subsided as the event carried on. Some analysts believe the fight served as an appetizer for Netflix’s upcoming Christmas Day NFL games, which will be Netflix’s first opportunity to stream live games from one of the four major U.S. sports. Owned in Core and ESG+ Portfolio.

(+) Nvidia (NVDA-US) The markets cleared an important hurdle this week. Nvidia is now the largest company in the world, so every time it releases results they are described as "the most important earnings report in history". We are certainly witnessing history in the making because no company has ever grown so fast, to such size and scale. Q3 sales beat by 6% or nearly $2B, while EPS beat 8%. However, Q4 revenue guidance underwhelmed following the recent string of outsized guide-ups, coming in at $37.5B vs the Street at $37B. Blackwell architecture is now in full production, expects to ship more Blackwell products in Q4 than originally anticipated (several billion dollars) and demand described as "staggering". Company also chalked up Networking decline to timing issues. In addition, the company pushed back against concerns about diminishing returns for AI scaling. We feel very fortunate we have been on the Nvidia train for nearly a decade now. We are still buying Nvidia. Owned in all Newton Group Portfolios.

(+) Palo Alto Networks (PANW-US) reported a very strong quarter with a 21% gain in remaining performance obligations (RPO,) a key metric of total value of contracted revenue yet to be delivered. There were multiple Palo Alto Networks price target hikes from Wall Street analysts. Shares were met with some minimal profit-taking since the stock ran up ahead of earnings. Overall, this was a decent quarter. It was not the blowout we have seen in past quarters and the metrics were maybe a bit soft. However, they were ahead of internal expectations. The company alos announced a 2:! stock split to occur on December 16th. Owned in US and Opportunity Portfolios.

(~) Powell Industries (POWL-US) reported a record 32% revenue growth in the fourth quarter, reaching $1 billion for the fiscal year, driven by strong performance in the oil and gas and petrochemical sectors. The company booked $267 million in new orders, maintaining a $1.3 billion backlog, and reported a significant improvement in gross margin to 29.2% for the quarter. Net income surged to $46 million in the fourth quarter, nearly tripling from the previous year. Powell is expanding its capacity and product offerings, including a new station breaker for renewables, and has increased R&D spending by 52%. The company ends fiscal 2024 with a strong financial position, holding $358 million in cash and equivalents and remaining debt-free. Powell has capitalized on the growing demand for complex electrical solutions across industrial sectors, utilities, and data centers. The stock has experienced extraordinary price momentum over the last year while maintaining solid fundamentals. Owned in Opportunity Portfolio.

(-) TransDigm (TDG-US) describes itself as “a leading global designer, producer and supplier of highly engineered aircraft components that are critical to the safe and effective operation of nearly all commercial and military aircraft worldwide.” TransDigm has grown through dozens of acquisitions, largely focused on being the sole-source producer of small airplane parts (e.g., handles and bolts), and aggressively raising prices for customers like commercial airliners and the Department of Defense. In some cases, prices for TransDigm parts have increased 40%+ per year for decades and the company has faced numerous allegations of price gouging the U.S. government as well as allegations of accounting fraud. The worry right now is that TransDigm’s model is enabled by burdensome regulation and bureaucratic negligence. What if this will change under the incoming Trump Administration and TransDigm becomes a target for the new formed Department of Government Efficiency? For the time being we will hold shares. Owned in Core, Cash Flow, and US Portfolios.

Company of The Week: MicroStrategy

Q3 EARNINGS PRESENTATION

Weekend Reading

RBC MacroMemo - November 19 – December 2, 2024 Election debrief / Good economic data / GDP is not S&P 500 / Peak Canadian pessimism? RBC

Elon Musk and Vivek Ramaswamy: The DOGE Plan to Reform Government Following the Supreme Court’s guidance, we’ll reverse a decades long executive power grab.WSJ OP-ED

The Testosterone Election Scott Galloway believes the more interesting conversation than why she lost, is how he won. NO MERCY / NO MALICE

What if you miss a mortgage payment in Canada? Licensed Insolvency Trustee Scott Terrio discusses the potential warning signs of mortgage trouble, troubleshoots possible solutions, and provides guidance on how to handle worst-case scenarios. HOYES MICHALOS

Failing to Succeed Some of the greatest businesses are defined by the chances they take to prevent the business from becoming stagnant. Creative destruction is a natural process that wipes out companies all the time. NOVEL INVESTOR

How the Ivy League Broke America The meritocracy isn’t working. We need something new By David Brooks. THE ATLANTIC [PAYWALL] or APPLE NEWS

What caused the worldwide spike in inflation in 2022? In a detailed study headed up by Peter Orszag (now CEO of Lazard, but formerly head of the Office of Management and Budget and the Congressional Budget Office) they found that it was mostly due to quirky supply chain disruptions and housing and accommodation price spikes. The latter were caused by elevated demand as so many people worked from home. WASHINGTON POST

A Chance to Build The risk for tech is that tariffs specifically and Trump’s approach to trade generally do more damage to the golden goose than expected. More expensive hardware ultimately constricts the market for software; tariffs in violation of agreements like the ITA give the opening for other countries to impose levies of their own, and U.S. tech companies could very well be a popular target. The opportunity, meanwhile, is to build new kinds of manufacturing companies that can seize on a tariff-granted price advantage. BEN THOMPSON STRATECHERY

A Certified Deadhead on the 9 Bands and Musicians Carrying on the Legacy of the Grateful Dead HUCKBERRY

Canada’s 100 Best: Fall 2024 Entertaining and Culinary Travel Issue. Make the most of Fall and Winter with an in-the-know roundup of exciting news from the Canadian food and restaurant scene. Discover the inside story of how industry professionals – from mixologists to sommeliers and chefs – entertain at home. VIEW ISSUE

Diversions

Santa Claus Is Coming To Town TORONTO'S SANTA CLAUS PARADE

Surveilled The Spies Hiding In Our Pockets. Ronan Farrow investigates the growing business of commercial spyware. HBO (CRAVE)

Leonardo Da Vinci Ken Burns’ Docuseries On The Renaissance Artist And Inventor PBS USA

Formula 1 Las Vegas Grand Prix ESPN

Landman Taylor Sheridan dramatizes the oil boom in the heart of west Texas PARAMOUNT+