Updated Reports

We have updated reports posted on Bank of Nova Scotia (BNS) and Sun Life Financial (SLF). Both companies have seen their shares take a hit amid the pandemic but continue to offer long-term growth potential and attractive dividend yields. Log in to see our most recent thoughts on BNS and SLF.

Company Updates

Shopify (SHOP)

Shopify posted what on most metrics we would have to call a blowout quarter. What is more impressive is not just the rate of growth that SHOP posted but the fact that this is on top of an already high growth rate AND large numbers to begin with. SHOP posted EPS of $1.05 compared to $0.01 expected and revenue of $714 million compared to $513 million expected. So, not only did SHOP beat on revenues by 39% (!), but the beat was huge on dollar value as well, at $200 million. Obviously, this rate of growth is more than likely not sustainable but there are interesting compounding impacts here over time with the 71% growth in new stores. Not all of these stores will grow to be big businesses but some likely will, which adds more recurring revenues for years to come which can then be further reinvested by SHOP into new growth.

We are in the middle of earnings season so don't forget to check out the Q&A for updates on quarterly results.

Better yet, make sure your watchlist is up-to-date so you get timely and relevant analysis straight to your inbox.

Market Update

The resilience of markets has been impressive over the year-to-date period in the face of one of the most severe bouts of unemployment modern society has ever seen. Understandably, individuals remain confused and often frustrated that markets do not seem to reflect the reality 'on the streets' and what is felt within many homes across the country. 

We continue to emphasize, however, that the broad index returns are not actually reflecting what is going on 'under the hood'. In the case of both the TSX and S&P 500, much of the returns are being driven by a handful of companies or sectors. Here is what year-to-date returns look like in Canada as of July 28. The TSX return is -4.5%:



Only three of ten sectors are positive with another three sectors in or flirting with 'bear market' territory. We see a similar trend in the US with the SPX return at 0.77%:


Again, only three sectors in the US are actually positive year-to-date but with typical big-cap tech names making up nearly a quarter of the S&P 500, it muddies 'reality' a little.

Our point? It is simply that even though markets may appear expensive or like they have run too far in the context of the current environment, it is not reflecting the reality that many sectors and the stocks within them are down materially. Finding them takes some digging and acceptance that their outlook might not be 'rosy' in the short-term, but while the indices are performing 'well', it does not mean that every stock within them is doing the same. 

Ironically, while we all use broad market performance as a measuring stick of how 'most stocks' are faring, the structure of the SPX and TSX have been telling us more about how a select few companies have performed and less about how the broad market is faring.





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Best wishes for your investing!

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