Gravitas - Reaching For New Highs

Dec 09, 2020 | The Newton Group


As we closed out November, Canada’s stock market finally erased the last of its pandemic-driven losses. The S&P/TSX Composite Index climbed during the month, clawing its way back into the green for 2020. Earlier this year, the Covid-19 outbreak wiped out as much as 48% on the Canadian benchmark. The Canadian benchmark rose above the 17,063.43 level from back in March 2020 as vaccine progress buoyed investor sentiment. Canada’s stock market, laden with value plays, stands to gain a lot from an effective vaccine delivered next year. Meanwhile the Dow hit a new all-time high last week and closed above the 30,000 level for the first time ever. The climb has been astounding given that it took 18 years for the index to get from 10,000 to 20,000, but less than four years to climb from that level to 30,000. The S&P 500 also hit an all-time record close. The Nasdaq finished at its second highest close ever but still slightly under its peak established over two months ago on September 2nd, 2020. And the small-cap Russell 2000 hit another new all-time high yet again which is an excellent development for the broader health of the market.

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Portfolio Notes

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

(+) Shopify’s (SHOP-T) merchants collectively made US$5.1 billion in sales from Nov. 27 to Nov. 30, up 76 per cent from last year’s totals for the Black Friday-Cyber Monday (BFCM) stretch. Shopify recorded more than US$2.9 billion in total sales on its platform during the 2019 BFCM, a figure its merchants reached this year by 5 p.m. EST on Saturday.

Owned in Core and Opportunity (SHOP-US) portfolios

(+) Zoom Video Communications (ZM-US) reported fiscal third-quarter earnings of 99 cents per share vs. 76 cents per share as expected by analysts, with revenue of $777.2 million vs. expectations of $694.0 million. With the coronavirus pandemic continuing to drive people to Zoom for work, school and family meetings, Zoom’s revenue grew 367% on an annualized basis in the quarter. More than 80% of the fiscal third-quarter revenue gain came from new customers’ subscriptions. Revenue in the Asia Pacific and Europe, Middle East and Africa grew 629% compared with over 300% growth in the Americas.

Owned in Opportunity Portfolio

(~) Salesforce (CRM-US) this week announced the acquisition of work-chatting service Slack for US$27.7 billion (CAD$35.8 billion) in a deal aimed at giving the two companies a better shot at competing against longtime industry powerhouse Microsoft. Salesforce has been building on its success in recent years to diversify into other fields, largely through a series of acquisitions that included its previous largest deal, a $15.7 billion purchase of data analytics specialist Tableau Software last year. The company also reported fiscal third-quarter earnings on Tuesday that exceeded analysts’ expectations but disclosed soft quarterly earnings guidance.

Owned in Core and U.S. portfolios

(+) Royal Bank of Canada (RBC-T) surpassed profit expectations in the fourth quarter amid a surge in earnings from its trading and investment banking operations that helped mitigate the impact of COVID-19 on the lender’s other branches. The bank's total net income inched up one per cent year-over-year to $3.25 billion in the three months ending Oct. 31. On an adjusted basis, RBC said Wednesday it earned $2.27 per share. Analysts, on average, were expecting $2.04 in profit per share. For the year, RBC's net income fell 11 per cent to $11.44 billion.

Owned in Core and cash Flow portfolios

(+) Okta (OKTA-US) shares rose sharply Thursday after the provider of enterprise identity-management systems reported revenue and adjusted earnings that handily beat analysts’ estimates. “If you take a step back and think of the business we’re in, we’re helping companies with their digital transformations,” said Chief Operating Officer Frederic Kerrest in an interview. “These mega trends have been around for the past five years… and have been accelerated by COVID, no doubt.”

Owned in Opportunity Portfolio

(+) Sea Limited (SE-US) shares jumped over 8% Friday after receiving a digital banking license in Singapore. Singapore is a growing wealth management hub that is becoming more open to fully digital banking companies to promote innovation and competition.

Owned in Core Portfolio

Weekend Reading

Canada's BEST Online Banking Experiences RBC Royal Bank provides the best Online Banking Experience in Canada. [READ]

Why do people invest in stocks? Top 10 factors that determine equity allocation for wealthy investors. [READ]

How Carbon Capture Can Help a Net Zero Strategy, and Boost the Economy The Covid crisis temporarily drew some focus away from another force that threatens to cause human and economic damage: climate change. [READ]

Economic forecasts are largely useless for the purpose of investing. This research reinforces a common theme which I have been presenting for years - follow trends in prices instead. [READ]

Comparative Roaring ‘20s. Apparently, we will have a cornucopia of vaccines and treatments available for mass distribution early next year. If so, then 2020 may mark the beginning of the Roaring 2020s. Let’s compare the current situation to the one before during the Roaring 1920s [READ]

If you find a good solution and become attached to it, the solution may become your next problem.

- Robert Anthony


Wealth Investing