As April winds down, the drumbeat of "Sell in May" commentary has been growing louder. On an overall basis, stocks tend to perform weaker during the summer months than the winter months, but it is far from an absolute rule that can be blindly followed by investors, and factors like how the market performs heading into the period have an impact. Over the last 12 months, this trend held as the S&P 500 declined 6.3% from last May through October and has since rallied over 6% since the start of November. However, like every other market maxim, while there is some truth to the "sell in May" trade, it is not a hard and fast rule. Post WWII, the S&P 500's median performance during the winter months has been a gain of 6.2% with positive returns 75.6% of the time. During the summer months, however, the S&P 500’s median return has been less than half that at 3.0%. Along with weaker median returns during the summer months, the S&P 500’s consistency of positive returns at 65.4% has been 10 percentage points weaker than the winter period. For the Nasdaq, the performance disparity is even wider with a median gain of 9.5% during the winter months compared to just 2.2% during the summer months. Here again, the disparity in the consistency of positive returns has been just under 10 percentage points (72.5% vs 63.5%). While overall returns during the summer months are weaker than during the winter months, the reality is more nuanced. Conclusion: holding equities over the weaker summer months is not bad for your portfolio. Do not sell in May.

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

Portfolio Notes

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

(SOLD) First Solar (FSLR-US) and Enphase (ENPH-US) We fully exited two popular renewable energy holdings mid-week based on what appears to a challenging long-term outlook for these companies based on current valuation. The timing was perfect as we avoided a bad earnings reaction on Enphase the very next day. Enphase blamed rising interest rates and new net metering rules in California as casting a shadow over rooftop solar growth prospects. No longer held in the Opportunity and Core ESG+ portfolio.

(-) Amazon (AMZN-US) dipped after the e-commerce giant cited concerns over its cloud business going forward. That overshadowed a revenue beat for the first quarter. Revenue increased 9.4% year-over-year, to $127.36 billion, beating analysts’ expectations for $124.55 billion according to estimates. The cloud business was strong again as AWS revenue came in at $21.35B vs. $21.0B consensus, up 16% from a year ago. Owned in US and Opportunity portfolios.

(~) Amgen (AMGN-US) missed on the top line but the bottom line was in line. Net income in the quarter surged ~92% compared to Q1 2022 to ~$2.8B ($5.28 per share, diluted vs. $2.68) thanks to ~$2B in "other income" earned in the quarter. The biotech giant is guiding toward revenue between $26.2B and $27.3B ($26.72B consensus). Amgen's best-selling drug in the quarter was the osteoporosis biologic Prolia (denosumab), which brought in $927M, a 9% year-over-year increase. The next best seller, Enbrel (etanercept), brought in $579M, a 33% decline from the prior-year. Owned in US portfolio

(++) Chipotle Mexican Grill (CMG-US) Shares of the Mexican fast food chain soared nearly 15% to hit an all-time high after the company reported quarterly earnings and revenue that topped analysts’ expectations. The strong results were fueled by robust same-store sales growth. Digital orders accounted for nearly 40% of sales during the quarter. Chipotle customers have been ordering their burritos and tacos more in person compared with the year-ago period. The company opened 41 new locations during the quarter, 34 of which included its drive-thru lanes reserved for digital order pickup. CEO Brian Niccol also said the chain has demonstrated its pricing power. Owned in US Portfolio.

(+) Canadian Pacific Railway Ltd. (CP-T) On the surface, CP’s in-line results don’t seem very exciting. But when you compare it to the results from broader transportation peer group, it’s clear that CP is outperforming the competition. In particular, new business wins (which includes the new Ford contract that started in January and some intermodal wins at the port of St. Johns, along with new contract wins with Schneider and Knight-Swift that benefit from the expanded reach of CPKC) helped drive stronger top-line growth. Going forward, the focus remains on CPKC integration and potential for synergy upside (which the company should provide an update on at its investor day in late June). Valuation remains attractive at 20.7x P/E on 2024 earnings, with potential for earnings estimate to move higher on higher synergy numbers. CP remains a core holding in our view and we continue to hold and recommend the name. Owned in Core Portfolio.

(-) Cenovus Energy (CVE-T) It was a bit of a messy quarter for CVE, but RBCCM notes that Q1 results are not indicative of the company’s execution capabilities. Digging into the numbers, production and AFFO both came in below street estimates while capex spend was in-line. From a high level, unfavourable weather conditions negatively impacted production and higher than expected cash taxes weighed on earnings. On the flip side, CVE continues to make progress on its deleveraging plans and raised its dividend by 33%. Net debt is expected to hit $4B by year-end, at which point the company is expected to return 100% of its excess free cash flow back to shareholders. Overall, the headline print is negative but the setup remains positive in our opinion. Owned in Core Portfolio.

(-) Danaher (DHR-US) Life sciences and medical diagnostics company Danaher delivered a first-quarter earnings beat , even as its lowered outlook sent shares tumbling. Revenue for the period ended March 31 declined nearly 7% year-over-year, to $7.17 billion, but outpaced analysts’ estimates of $7.03 billion, according to Refinitiv. When excluding the impact of Covid testing sales and sales of products that support COVID-19 related vaccines and therapeutics, Danaher realized base-business core sales growth of 6%. Adjusted earnings-per-share (EPS) decreased 14.5% annually, to $2.36, ahead of the consensus estimate of $2.25 per share, Refinitiv data showed. The revised outlook was impacted by the ongoing destocking of bioprocessing inventories. Danaher management noted Tuesday that they are seeing a greater-than-anticipated drag from larger customer inventory destocking. These customers account for about 70% of the company’s bioprocessing sales. As a result, management now sees growth in this cohort coming in around 6%, down from the 7% to 8% management was previously expecting for 2023. Owned in US Portfolio.

(~) Enovix (ENVX-US) designs and develops silicon-anode lithium-ion batteries. This week the company reported 1Q23 results that came in largely as expected which marks two uninterrupted quarters absent negative headlines following a series of operational missteps in 2022. The company is matching expectations, managing expenses, and delivering on cell production. Enovix is an architecture-first, materials-agnostic company currently leveraging the advantages of 100% silicon anodes with technology that is truly groundbreaking. The company shipped 12.5k batteries in 1Q23, better than the 9k shipments expected at the end of 4Q22. Cash at the end of 1Q23 was $294M, which excludes $70M of Malaysian funding in negotiation and an estimated $148.4M of net proceeds from the convertible debt offering. Including the recent offering, Enovix has $440M in cash which is likely enough capital for 4 production lines. Owned in Opportunity Portfolio.

(+) CGI Inc. (GIB.A-T) reported solid Q2 results that came in well ahead of consensus estimates. Revenue came in at $3.72B (Cons. $3.57B), EBIT at $600.8M (Cons. $575.6M), and adj. EPS increased 19% Y/Y to $1.82 (Cons. $1.79). Bookings did come in a bit light at $3.84B (Cons. $4.08B, book-to-bill 103.3%) and relatively in-line with its backlog sitting at $25.24B. Heading into this quarter, there was some investor worry that organic growth would be slowing given the macro environment, but that is very much not the case as constant currency organic growth came in at 8.6% (Cons. 3.9%) with some margin expansion, as well. It is also worth noting that RBCCM has noticed that although CGI is not gaining material market share Q/Q, the peers have been slowing in terms of growth proving the resilience of CGI’s business and ability to execute. CGI continues to benefit from the modernization of IT systems as well as the outsourcing of business process services, and we continue to view the stock as a long-term hold. Owned in Core ESG+ portfolio.

(+) Eli Lilly & Co (LLY-US) The company posted first-quarter earnings showing a revenue beat and raised its full-year guidance. The company posted net income of $1.345 billion, or $1.49 a share, for the quarter, down from $1.903 billion, or $2.10 a share, in the year-earlier period. Adjusted per-share earnings came to $1.62, below the $1.73 FactSet consensus. Revenue fell 11% to $6.960 billion from $7.810 billion, but was ahead of the $6.864 billion FactSet consensus. The revenue decline was driven by lower volumes as demand for its COVID antibody treatment waned. Earlier, the company reported that its obesity drug tirzepatide achieved up to 15.7% weight loss in adults with obesity or overweight and type 2 diabetes in a late-stage trial. Owned in US Portfolio.

(+) McDonald's (MCD-US) delivered better-than-expected EPS and revenue in Q1. Traffic increases despite price hikes. Same-store sales up nearly 13%. Digital represents 40% of systemwide sales. Owned in US Portfolio.

(+) Microsoft (MSFT-US) Shares of tech giant Microsoft gained more than 8% after a better-than-expected earnings report a day earlier. Analysts have added to bullish sentiment on the stock as Microsoft delves deeper into artificial intelligence investments and integration with Azure. Owned in Core and US Portfolios.

(-) NextEra Energy (NEE-US) delivered a beat on revenue and earnings this quarter. Florida Power & Light generated EPS growth of 22% Y/Y, driven by continued investment in the business. Regulatory capital employed increased 11%, while average number of customers increased by 65,000 from the prior year. NextEra Energy Resources generated adj. EPS growth of 16.5% Y/Y, driven by strong renewables and storage origination, adding 2020 MW to its backlog. The company reaffirmed its long-term outlook for mid-to-high-single digit EPS growth from 2023 through 2026. NEE remains a best-in-class utility at the forefront of renewable energy development coupled with earnings growth. We would continue to own the stock and be buyers at these levels. Owned in Cash Flow portfolio.

(+) Roper Technologies (ROP-US) Outperform-rated Roper’s upside 1Q23 and guidance boost that more than flowed through the EPS beat onto the raised guidance was a standout this quarter. While most industrial companies are taking a conservative approach to guidance raises, Roper’s 75% software mix plus mostly non-cyclical Technology Enabled Products segment (25% of revenues) is providing sufficient line-of-sight to boost guidance at this early stage of the year. With +$4 billion in M&A firepower, we like Roper’s near term prospects to pursue software/SaaS M&A. Valuation on a P/FCF basis screens as attractive, and we would expect the shares to outperform in a weakening macro. Owned in Core and US portfolios.

(-) Silgan Holdings (SLGN-US) The leading supplier of sustainable rigid packaging solutions for the world's essential consumer goods products fell short of Q1 sales expectations, and offered light Q2 guidance. They reported first quarter 2023 net sales of $1.42 billion and net income of $72.0 million, or $0.65 per diluted share, as compared to first quarter 2022 net income of $84.9 million, or $0.76 per diluted share. Excluding non-recurring sales associated with Russia of $9.5 million in the first quarter of 2022 and the negative impact of foreign currency translation in the first quarter of 2023 of 1%, first quarter 2023 net sales were comparable to the prior year period. Owned in US Portfolio.

(+) NuScale Power (SMR-US) jumped after saying it signed a memorandum of understanding with Doosan Enerbility Co. and Export-Import Bank of Korea to support NuScale's small modular reactor deployment. With the assistance of Export-Import Bank of Korea, the companies said they will be able to deploy NuScale VOYGR plants worldwide and utilize a Korean supply chain when deploying NuScale plants in the Asian market. Owned in Opportunity Portfolio.

(+) Visa Inc. (V-US) reported a good quarter with beats on revenues and adj. EPS as the global economic recovery continued with more people travelling and shopping. These trends are expected to continue given China re-opening and continued new client wins which are expected to support growth over the next several years. We would continue to own the stock and add on pullbacks, as we acknowledge consumer weakness could be a headwind to near-term growth. We like the credit card players in the context of their duopolistic hold on the payments market (V and MA control ~90% of all credit card transaction volumes globally), robust balance sheets that are cash rich, strong FCF generation and operating margins in the range of 55-60%. Owned in Core and US portfolios.

(+) ExxonMobil (XOM-US) climbed to an all-time high after reporting blowout earnings. ExxonMobil announced EPS of $2.83 , better than the expected $2.60 expected. Revenues were $86.56 billion last quarter, up from $82.66 billion projected but down from $87.73 billion in Q4 2022. The company experienced continued strength in energy prices and refining margins throughout the quarter. Owned in Opportunity portfolio.

Weekend Reading

RBC MacroMemo - April 25 - May 15, 2023 Banking stress / Labour supply / Strikes / EM debt / Steepening curve / Canadian housing / Fiscal burden RBC GAM

The History of AI in 7 Experiments The breakthroughs, surprises, and failures that brought us to today. THE GENERALIST

Adobe’s AI video Adobe continues to push hard to disrupt itself before other people do it - it already has a preview AI image generation product and how it’s previewed what video might look like. There’s a rights story here, but also an interface story - I don’t think text prompts are the right UI for a lot of generative AI use cases. ADOBE

Up, up, and away: The future of air mobility Flying taxis may no longer be a flight of fancy. While the challenges are real, this segment of advanced air mobility is ready for takeoff. MCKINSEY

The Problem With Being House Rich The housing market is more important for the middle class than the stock market for the simple fact that ownership of residential real estate is more widespread. The top 10% controls nearly 90% of the stock market while the bottom 90% owns more than 55% of the housing market. BEN CARLSON