Corners of the Market:

2024 has been a very solid year for the equity markets due to a favourable macro backdrop of declining interest rates, a slowdown in inflation, and especially after the election results, where the markets expect Trump’s policies of putting America first can help corporate earnings over the next few years. As a result, not only broad market indices but risky asset classes, such as small-cap, high-growth stocks, cryptocurrencies, etc., have performed strongly and hit new record highs.

That being said, despite a record year where both the S&P 500 and TSX achieved double-digit returns, not all sectors performed well, and there are some corners of the market that have been under pressure. These are where investors can take advantage of their temporary “losers” by claiming capital losses for tax-loss selling, which could offset capital gains.

This strategy can be accomplished by simply selling a temporary losing name in a non-registered account, which could then be used to offset the net capital gains tax investors have on their investments. The unused amount of capital losses can be used from up to three years in the past or carried forward indefinitely. After 30 days of the sale, these holdings can be bought back if investors believe in the long-term fundamentals of these companies.

Although writing off good companies based on one year of bad performance could become a regret for many investors, some of these names that have been under pressure may continue to see underperformance over the long-term. During a bull market cycle, we think investors should respect the wisdom of the crowd. Therefore, investors need to evaluate these names for future reinvestment on a case-by-case basis.
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His fund is an investment vehicle, but a lot of investors also own a stock from the fund in a trading account. In that case, they can sell calls against a position, or they sell some puts if they don't have a position. In other words, if you're going to own it outside a fund, treat it as a trade rather than an investment.

He would like to see a tempered market with average returns. Doesn't think that there is any reason, outside of a shock eg geopolitical shock, that there is a reason for the markets to be negative. However, he does not like runaway momentum markets. Wants a quiet, normal year next year.

Company Highlight - Revolve Group (RVLV):

Revolve Group (RVLV) is a next-generation online fashion retailer with a focus on Millennial and Gen Z consumers, primarily catering to female audiences. It mostly operates through two brands: REVOLVE and FWRD. The company has built a large, engaged audience through collaborations with influencers, and its proprietary algorithms analyze consumer behaviour to help manage its inventory. In the past few years, it has seen sluggish growth as e-commerce growth normalized and consumers returned to physical stores, and its margins also came under pressure due to inflation. However, its brand presence among the younger generations remains strong, and with inflationary pressures easing, its margins are expected to improve, helping its stock price. 

RVLV is up significantly on the year, up 107% year-to-date and 161% on a one-year basis. It is a small-cap stock ($2.4 billion market cap) and while it is not cheap (47X forward earnings multiple), its forward earnings growth is expected to average around 27%. It is profitable, but its profit margins have compressed in recent years as higher logistics and fulfillment costs and inflationary pressures have taken hold. Although, these pressures are beginning to ease, and its core Revolve segment is beginning to see a strong rebound in demand, helping future margin expectations. 

RVLV has a strong history of beating earnings estimates, and we can see its profits have begun to rebound in recent quarters. We feel that with inflationary pressures easing and the potential for lower interest rates, that RVLV can continue to benefit from a strong US economy. 
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Peter talked more about his reasons for liking small caps. Historically small caps have always been more expensive than large caps because they grow faster. Small caps get more attention as takeover or merger candidates. In the last three years they became cheaper especially in 2022. Small caps have the capacity to meet the market's needs when business is brought back to Canada. M&A will be easier over the next 4 years. Small caps got their house in order during Covid so they are in good financial shape. The stocks are volatile but growing and having no debt and lots of cash.

NVDA's upcoming earnings on Wednesday, after the bell.

The last of the behemoths to report. He's wildly bullish about everything AI, and he's terribly scared. Even during the recent election campaign, you'd see something online and you didn't know if it was real or not. Quantum is coming and it will be a disruptor, just as INTC was for others. Always something new coming along and that concerns him a bit.

NVDA is now the biggest weight in the NASDAQ, recently passed AAPL and MSFT. Let's look at the QQQ and draw trend lines along the lows and the highs. The last time we got to the upper channel was July. But we did the same thing last week. If NVDA doesn't beat and get people still excited about AI, odds are we're going to come back down into the range. Eventually (months or quarters), we'll come back to the bottom of the trend. That's the bigger risk here. 

Options market is saying it'll be a move up or down of $11. It'll either gap up above old highs, and hopefully hold. But if it doesn't, you have a big reversal coming to the downside and it could break the market. We talked about the gap after the election, and it would bring the NASDAQ back into the range that would close the gap in the S&P 500 and create bearish momentum with a failed breakout.

Let's cross our fingers that NVDA doesn't disappoint.

They boast 70 million ad subscribers. They have tackled every single challenge in the past and thrive. They can be profitable and can afford to explore new areas like live sports.

It makes sense in terms of global unrest and cybersecurity concerns.

They are about to report. See how accretive back-to-school sales were. Is looking for revenues to rise 3-5%. Last August, they already raised their outlook.

Though he doesn't believe in it, cryptos are one of the safest areas to invest in under Trump, because he's so positive about it. He has his own crypto business.