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

Right now, seeing a lot of investment going to capital equipment. So this is the most attractive area in the data centre value chain. As you need more memory and chips, it comes with increasing capex requirements. Attention has shifted from tracking the capex of the hyperscalers (who are investing in the chips) to the chip companies (who are investing in incremental capacity).

Absolutely. She likes memory and other components as well, still very attractive. 

However, as we get further into the cycle, we're going to start talking more about capacity additions on the memory side. At some point, once supply seems to be exceeding demand, these stocks will flatten out. 

Not just yet, but it means that the better risk/reward right now is to invest on the capital equipment side -- companies that provide the machinery to build more memory capacity. That cycle typically lasts longer than the memory cycle.

Uses for space such as broadband connectivity and defense have been around for several years. But these markets are pretty small compared to the data centre trade. From a historical perspective, the space race looks a bit too risky to get involved in.

Now we're talking about data centres in space. The technology isn't very different from what satellites are doing today -- using solar power and having compute on board. The idea is much closer to reality than people think. Launch costs need to decline significantly for it to be economical.

The main company building these centres is SpaceX, the leader in space launches as well as operating satellites. Elon Musk has a lot of know-how in AI and chips. It will clearly dominate the space. But don't underestimate other players such as GOOG. We're going to see a lot of activity here. It's not that in 2 years all the data centres will move from Earth to space. With limited supply and limited launch capacity, there's going to be a lot of potential for returns here.

Her firm discloses all of its holdings on its website, spear-funds.com.

You need to closely monitor all the capacity announcements coming from MU, SK Hynix, and Samsung. Usually after 1-3 years of capex deployment in equipment, that's when you see the market start to stabilize.

The software sector has been treated as a whole, driven by companies with a resilient SaaS business model trading at very high multiples. What's happened over the past 3 years is that people are realizing that a lot of these business models can be replicated with very little effort by using AI. So the sector's come under attack.

The area for investors to avoid (or at least do more thorough due diligence) is that of software applications. Think CRM or HUBS. If the AI solution is equally good, these companies will face competitive threats.

On the flipside, some companies are providing the infrastructure for new entrants to build new tools and applications. This is the part of software that she does like. These tools include cybersecurity, which she finds pretty interesting right now.

There's a real bifurcation between applications and infrastructure. Sticking with infrastructure is the better way to go.

This is what her firm concentrates on.

Her team covers a broad range of companies, and they talk to those companies constantly. They then try to figure out who their suppliers are and where's they're investing next. For every company in the value chain, she knows where its capex dollars are going. Where the money's going is usually where the opportunities are. Boots-on-the-ground research allows her team to see where the puck is going.

The old saying is that what happens in January, so goes the rest of the year, 75% with a good January, and 50% if it's poor. However, the second year in a US presidential cycle is the worst at a 5% return compared to 10% in other years. He's looking at high-quality industrials for opportunities.

Really strong, especially in the small- to mid-cap space. When you look at gold, silver, and commodities in general, you've seen a huge rotation of capital into those areas.

A few factors are driving all this. Deregulation by the Trump administration has been fuelling a lot of companies in the small-cap space. There's also been a rotation in the markets potentially away from high-flying, highly valued tech stocks (especially software) and going into things more domestically related. With huge GDP growth in the US, perhaps the consumer is a lot stronger than people thought -- that should also benefit smaller-cap companies.

On gold and silver, it's probably a continuation of the debasement trade of the US dollar. Foreign central banks are choosing hard assets like gold over treasuries and fiat currency reserves.

His team believes 2026 will be even more volatile than 2025. 

Partially because of geopolitics, partially because not much has been solved within the US government (perhaps yet another shutdown), and partially because valuations have come up (may not be extremely overvalued, but they're still not cheap). And partially because after 3 years of a good bull run, you may see some giveback and it may happen more violently than we'd like.

This is going to be a pick-your-spots year. You don't necessarily want to just throw your money into an index and have it passively managed. Maybe stock-picking will be back in vogue. Seeing a big rotation to value from growth. Those themes are definitely going to continue.

His team also thinks that the previous generals may not be the generals for this year or this cycle. May see a lot of capital flows into previously unloved areas.

Geopolitics are very hard to discount. Canada and the US are very linked in terms of the auto trade. Would take years for the US to no longer depend on Canadian auto parts manufacturing and trade. Could that happen in the future? Yes. Do we know how CUSMA negotiations are going to go? No.

Worst-case scenario is that if CUSMA is not renegotiated in its current form, there will most likely be a level of tariff. Well-run operators such as LNR and MG will be able to overcome it through efficiencies in production. So he's not that concerned about the geopolitics.

Has many facets to it -- pharma, biotech, equipment makers, HMOs. He owns two healthcare names right now, MRK and BMY, as well as positions in some HMOs.

Likes healthcare in general. Balance sheets are great. Has been unloved in last little while. Seeing $$ rotate back into the sector after the big scare with Trump coming in and reducing pricing. That rhetoric's died down a bit, especially with deals being made.

Huge opportunities with AI, especially with pharma. Can use it to reduce R&D, accelerate development pipelines, and streamline businesses. A lot of costs can be reduced and head straight to the bottom line.

Natural gas prices in the US have gone up. In Canada we're more land-locked, though that's getting better with LNG Canada. But we don't necessarily benefit from the high price that you see quoted on the screen. So you can't expect it to translate into the same degree of free cashflow for Canadian companies.

Investors are probably looking for more than he is. For example, he doesn't understand TSLA. He has a Tesla car, but he doesn't understand the valuation and what people are willing to pay for those pie-in-the-sky promises coming down the road. 

Some of those stocks are overvalued right now, while others like MSFT have a bit better valuation after the recent correction. The street needs to see results a lot higher than expectations to extend the rally. 

A lot of big tech will be reporting over the next 2 weeks. If we come through the next 2 weeks and the S&P 500 is breaking out to new highs, above 7000, that would be very bullish. But if we're below and starting to roll over, that would be very bearish in the short run. He wishes he knew which one it was going to be. At this time, he'd probably argue that it's going to be higher than lower.