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PORTFOLIO MANAGEMENT CONFERENCE JANUARY 2025 Part 2
Day 2 covered more ideas geared towards Canadian centric investors.
Canadian Economic Update
- What’s going to create a positive story in 2025? Not seeing it
- We don’t build things
- Too much tax and not spent effectively
- Too much spent on housing and we aren’t getting our money’s worth
- 1% GDP growth
- 1.35-1.45 CDN $
- Borderline impossible to calculate full impact of 25% tariffs
- Tariffs will encourage more onshoring over time
- Labour challenges > rising wages > higher inflation
- Economic divide in Canada is homeowners vs renters
Canadian Industrials
- Pricing is strong for rails and market share good. Macro the big unknown
- Analyst didn’t think tariffs would be coming as advertised as railways aren’t subject to them anyway. Feels it is a blustery, negotiation tactic
- Bullish on waste sector
- Waste is decentralized, recession resilient, good revenue visibility and barriers to new competitors
- Nuclear backlog at all time high
- Powersports could be facing tough environment
Canadian Telecom
- 2024 was awful for sector. Why? Lower revenue and higher for longer interest rates
- Balance sheets strong but where is growth going to come from?
- Don’t look for a comeback in 2025
Canadian REITs
- 2024 performance lackluster. 2% returns in 2024.
- Rate cuts make sector appealing and RBC calling for further cuts (different thought than telco analyst)
- Senior housing good. Office bad
- Looking for 7% NAV growth this year
- Current valuations are 22% discount to NAV
Canadian Oil and Gas & Energy Infrastructure
- Like companies with long life assets and shareholder alignment, dividend growth
- New SU CEO spoke and he’s not coming out of retirement to mess around. Turnaround quicker than expected so far
- Infrastructure looking to low leverage and low payout ratio names
- Building data centres is a good revenue story
Canadian Banks
- Expecting Bank of Canada rate to bottom and unemployment rate to peak in 2025
- Return on equity for banks rising and 2026 showing a strong set up
- Look for average Price/Earnings multiples and significant earnings revisions in years ahead
- Buy on weakness
Canadian Consumer Staples and Discretionary
- Tough year ahead
- Consumers will focus on needs over wants
- Average mortgage cost to increase $500/month which is money that cannot be spent on other things
- Housing unaffordability at all time highs
- Likes companies with consistent sales and earnings (L and DOL) and resilient business models (ATD)
- Companies aren’t cheap at this juncture
Canadian Technology
- Gen AI is the most significant technology in decades
- Sector poised to outperform again in 2025
- Global tech spending expected to grow 9.3% this year
- Looking at companies that can grow organically
- Valuations don’t show any bargains right now
Still awake after all that? Stay tuned for Day 3!
Regards,
Todd Kennedy
