A Comment -- General Comments From an Expert (A Commentary)

Believes inverted yield curve, and strength in markets pointing towards a "tale of two cities". Would advise investors to be prepared in the case of a market sell off. Investors should pursue a policy that takes advantage of market strength, while also protects them against economic slowdown. If US Fed doesn't cut rates soon enough, may not be in time to save "weakening" consumer base. Rotation out of "narrow" tech names also very good sign for the broader markets. Question is whether sector rotation will continue, out of tech into other sectors of the economy. 

Heading into September, he holds plenty of tech and value stocks, but is underweight defensives--utilities and staples. He's totally invested, though aware that September is the most volatile month. He will ride things out: the economy looks good

September will definitely be volatile, through October in the U.S. election. She has some cash after taking some gains tech. A rate cut cycle is coming and we got through Nvidia, whose report was good, and the economy is good (decent GDP number and real income) to set up decent earnings. Will buy any dips.

In the crypto world, people are shunning Ethereum and prefer others like Bitcoin.

Company Highlight: Union Pacific Corporation (UNP)

Union Pacific Corporation (UNP) operates as one of the largest railroad companies in the US. The business model is very similar to CNR, aside from one drawback that UNP’s shipment volume growth over the years has not been as strong as CNR.

The rail industry is largely mature, with the growth algorithm to be in the range of 1%-2% in volume and 3%-5% in pricing. The industry has been in consolidation mode for years, and operational efficiency has been the key lever to create shareholder value. That being said, the business has tremendously strong staying power, and investors can comfortably own UNP for decades without worrying too much about technological disruption. Additionally, the company has a track record of consistently growing dividends over time was quite impressive, 10-year dividend growth was around 11% on average. In addition, UNP bought back around 32% of the total share outstanding in the last ten years.

Looking at its financials, we see its valuation over the past 10 years has been consistent, this is largely because UNP is perceived as a low-risk, cash cow type of company. There is some cyclicality to its earnings due to the inherent cyclicality of the rail business which is sensitive to the macro environment.
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He doesn't like to do either. He's after GARP (growth at a reasonable price) at all times. NVDA is undisputed leader in the sector. Companies are going to have to continue to invest heavily, whether talking about end users of AI or cloud services.

The concern is do we see deceleration in growth momentum at some point for a company like NVDA that, for now at least, is predominantly hardware. We've seen that in the past with other producers. We'll see a bit more growth out of NVDA before concerns about it stalling.

He's more invested right now than he'd have thought. It's been a generally constructive summer. With the US election, and turbulence in September/October, he'd anticipate talking about de-risking right now. The game has changed in the last 3 weeks, market participants are a bit more confident to look for opportunities and get their feet back in the water. He puts himself in that camp.

Have to be careful in the discretionary space. Canada has had rate cuts and will have more by year's end, and the question is have we caught it soon enough to prevent demand decay in the consumer space. If we haven't, consumer discretionary is going to be pressured.

In the case of a MCD or QSR, we shouldn't see that same sensitivity to economic growth. He's not saying we're in the all-clear, but if we do get rate cuts to the extent that the market thinks we are, those recessionary or negative growth fears start to wane. Which means we can look at the consumer space a bit more positively.

Getting a place. You can see by the earnings projections of NVDA that infrastructure is going to continue to grow. Think of it like a wheel. In the middle, you have data and the hyperscalers. Around it is model training like GOOG, META, MSFT -- where they train the models to digest data and deliver a result. Outside of that are the applications.

Everyone's been waiting for the infrastructure to get set up. It's set up, but has a long runway. He thinks the interesting area is around the model training, as it can also extend into the applications. You can see it being monetized in healthcare and entertainment.

Cryptos ebb and flow. The Nasdaq has been a little weak. Investor sentiment is negative and it's a volatile asset class.

Company Highlight: Canadian National Railway Company (CNR)

Canadian National Railway (CNR) is one of the largest railroads in North America. The company has been around for many decades and operates in a favourable industry structure as a duopoly along with Canadian Pacific Kansas City (CP) in Canada. CNR has been one of the most solid performers in the Canadian industrial sectors over the years. CNR’s 20-year total return was around 14.4% compounded annual growth rate (CAGR) with dividends included.

In terms of its financials, it pays a decent dividend yield of 2.0%, along with a 4.4% share buyback yield on the trailing twelve-month basis. It has demonstrated a solid organic growth profile over the years due to the tremendous pricing power of the rails industry. Going forward, management expects to continue to compound its EPS in the range of 12%-15% over the long term. It trades at a reasonable valuation of 19.5X forward earnings, a slight discount to the company’s historical averages but on par with the overall industry.

We believe that CNR’s management can continue to grow organically through a combination of volume growth and price adjustment over time along with improved operational efficiency to create long-term shareholder value. CNR has shareholder-friendly policies with a generous capital returns program that is partially supported by a moderately leveraged balance sheet. We think the company is an above-average operator in the industry that trades at an attractive valuation.
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He's been expecting--and is positioned for--interest rate cuts. Powell is set to do this in September. He's a long-term bull and cuts will boost the forgotten stocks of the last 18 months. Megatech still has great value (i.e. Microsoft, Apple) at decent multiples. Nvidia's report will be influential, of course. He's bullish utilities and REITs. The market has been expecting a wider slowdown for 2 years, but the decline in inflation is allowing banks to cut rates and re-stimulate demand.

Most of the big banks report this week. BNS will be interesting because of its foray into the US. The yield curve in the past 2 years is an inverted one. Rate cuts should help the banks' margins. We have yet to have the hard landing typically seen at the end of a business cycle and isn't reflect in stock classes--that's his biggest concern. Don't chase the banks if they report positive earnings, though definitely buy dips. Last week from Jackson Hole, Jay Powell didn't talk about the balance sheet which is a big part of QE easing, which the market needs to hear. Powell was clearly dovish, but the market missed the go-slow message. Instead the market priced in 200 basis points of cuts in the coming year that we won't see. The market is too optimistic; he sees a bumpier market. Lastly, the volatility around Nvidia and AI is very high, so NVDA's report tomorrow will be a big move one way or the other.

No. He expect bond yields to fall. We'll stay in this yield range and we're likely now in the low end of that range. Most investors follow trends, when they need to anticipate trends.